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Strategic Options for Investment in

Transmission in Support of Offshore Wind

Development in Massachusetts
Summary Report with Expanded Technical Information
January 8, 2010

Susan F. Tierney, Ph.D.

With Andrea Okie and Stephen Carpenter

Analysis Group, Inc.

This White Paper was commissioned by the Massachusetts Renewable Energy Trust (“MRET”).
This paper represents the views of the authors, and not necessarily the views of the MRET or the employer of the authors.
Water Depth and Wind Turbine Mounting Technologies 4 
Offshore Wind Resource Potential 6 
Economic and Environmental Benefits of Offshore Wind Development 7 
Transmission Models for Wind Power: Key Concepts and Distinctions 21 
Overview of Transmission Cost-Recovery Models 24 
Socialized Transmission Cost-Recovery Models 26 
Merchant Transmission Cost-Recovery Models 30 
Economic Development Transmission Cost-Recovery Models 31 
Transmission Models Used in Europe for Offshore Wind 33 
Studies of Transmission Costs for Offshore Wind 39 
Offshore Wind Transmission Study Details 42 
ISO-New England’s “Governors’ Economic Blueprint” Study 43 
Core Attributes of and Assessment Criteria for Strategic Transmission Models 47 
Strategic Option Set for Consideration by Massachusetts Policy Makers to Support
Transmission for Offshore Wind 52 

The Massachusetts Renewable Energy Trust (“MRET”), in cooperation with the Massachusetts Clean
Energy Center (“MCEC”) engaged an Analysis Group team led by Dr. Susan Tierney to establish a
technical and policy framework and actionable policy recommendations for the integration of offshore
wind power into the existing power transmission/distribution system in Massachusetts. The study was
designed to take into consideration a number of dimensions that might affect the design of a workable
framework for offshore transmission, including the potential for wind resources in nearby offshore
locations, key power system technical factors, the prevailing energy and environmental policy framework,
the structure of the electric industry in the region, local economic and industrial development objectives,
and federal and state regulatory authorities.
Analysis Group coordinated its review and analysis with a team of state energy and environmental policy
officials, including those at the MCEC, the Executive Office of Energy and Environmental Affairs, the
Department of Public Utilities, the Division of Energy Resources, and the Office of Coastal Zone
Management. Further, Analysis Group conducted its study by building off of the work of a variety of
organizations currently examining issues related to the delivery of offshore wind power, including ISO-
New England (“ISO-NE”), the Massachusetts Offshore Wind Collaborative, the Massachusetts
Technology Collaborative (“MTC”), and other relevant state agencies.
The Commonwealth’s energy agencies have requested this report as a complement to many other state-led
efforts already underway in support of wind resource development in the state or off of its shores.
Among other things, these efforts include: the Governor’s establishment of a goal of having 2,000
megawatts (“MW”) of wind energy in Massachusetts (and its bordering federal waters) by 2020; the
Massachusetts Ocean Management Plan under development by the Secretary of Energy and
Environmental Affairs; the Port and Support Infrastructure Analysis for Offshore Energy Development
being conducted through the MCEC; hosting a wind-blade test facility in Massachusetts; developing a
proposal to reform the process the state uses to site onshore wind facilities; and a host of other policies
that target green and renewable power more generally, such as the Green Communities Act (including its
provision that utilities enter into long-term contracts for renewable power), the Renewable Portfolio
Standard, the Green Jobs Act, and the Global Warming Solutions Act.
This Technical Report provides recommendations to the state for a menu of high-level options that could
be pursued to facilitate transmission to link offshore wind resources with the onshore electric grid. Those
recommendations are described at the end of this Technical Report, following sections that detail the
policy context for the development of offshore wind, the technical potential for wind development in and
around the Massachusetts coastline, important technical considerations that set the stage for integrating
wind into the region’s electric grid, and other background issues relevant for evaluating the strategic
options for accessing offshore wind. This Technical Report follows the release of a higher-level
Summary Report (issued on December 2, 2009), and provides more detailed background, context, and



Wind is one of the few significant indigenous energy resources located in, and in close proximity to,
Massachusetts. It is also renewable, emits no greenhouse gases (“GHG”) to generate electricity, and is
capable of producing power at a fuel price that is both extremely low and beyond the control of foreign
suppliers. These features distinguish this energy resource from the other sources of supply used to
generate electricity in or around the state. Massachusetts imports nearly all of the fuel used to generate
power, and to heat and cool people’s homes, offices, schools, shops and factories in the state. As of 2007,
94 percent of the energy consumed in Massachusetts was derived from GHG-producing fossil fuels,
including coal, natural gas, and petroleum products used for heating, transportation and electricity
generation. 1
Even compared to other parts of the U.S. that have strong wind resources, those located in Massachusetts
(primarily offshore) are very rich. As shown in Figure 1 below, Massachusetts’ offshore wind resources
are outstanding from a technical potential point of view and relative to those located in other parts of the
U.S. 2

Figure 1
U.S. Wind Resources by Class of Wind – Including Off-Shore Areas

Source: U.S. Wind Resource Map, National Renewable Energy Laboratory, May 2009, available at:


Massachusetts has by far the best and most accessible offshore wind resource potential in New England,
with excellent potential along nearly all of the state’s shoreline. This valuable resource results in part
from the water depth in Massachusetts’ offshore areas (see Figure 2) and its wind speeds (see Figure 3).
(These figures are from the draft and final versions of Massachusetts Ocean Management Plan. The draft
plan was released in June 2009, with the final plan released in December 2009.)

Figure 2 Figure 3
Water Depth – Offshore Massachusetts Wind Speed – Offshore Massachusetts

Source: Draft Massachusetts Ocean Management Plan, June 2009 and Massachusetts Ocean Management Plan, December 2009.


Water Depth and Wind Turbine Figure 4
Mounting Technologies Technology Progression for Offshore Wind Turbines
Water depth and wind speed matter
for wind development because they
affect the technological feasibility
and economic viability of offshore
wind projects. For example, currently
available mounting technology
(primarily monopole) for wind
turbines is only suited for projects in
water up to about 30 meters in depth.
Projects at depths beyond 30 meters
require stiffer, more substantial
technologies that are just starting to
be deployed today but are likely to
become more prevalent within the
next 5 to 10 years. For depths of
greater than 60 meters, floating
structures and advanced technologies Source: Energy from Offshore Wind; W. Musial, S. Butterfield, B. Ram,, NREL
may be required, and are not likely to & Energetics; Presented at Offshore Technology Conference, Houston, Texas,
be widely used for at least 10 years. May 2006.
(See Figure 4.)
Shallow Water
Figure 5
Often used in shallow water (up to 30 Shallow Water Mounting Technologies
meters), monopiles are simple and
proven, and their footprint and effect
on the seafloor is minimal. (See
Figure 5.) Monopiles are used
throughout most of the existing
offshore wind farms worldwide, such
as the 160-MW Horns Rev wind farm
about 10 miles off the west coast of
Denmark. 3 As depth increases
though, monopiles not only need to
be longer, but also thicker, which
implies more materials and cost.
Gravity base foundations (essentially
large slabs of concrete) are an
alternative to monopiles, and they Source: W. Musial, S. Butterfield, B. Ram, B., “Energy from Offshore
have been used in the 160-MW Wind,” NREL & Energetics, Presented at Offshore Technology Conference,
Nysted wind farm off the southeastern Houston, Texas, May 2006.
coast of Denmark. Gravity base


foundations have more flexibility than monopiles, but they require much more preparation of the seafloor.
Suction bucket foundations are different from monopoles (which are driven deep into the sea floor) and
gravity base foundations (which sit on top of the sea floor). Suction buckets are steel tubes that resemble
an upside-down bucket, and drive themselves into the sea floor through the hydrostatic pressure produced
by creating a vacuum inside the bucket. Suction works not only to drive these foundations into the sea
floor, but also to keep them anchored there. Suction buckets have not yet been used commercially in the
context of wind power in deep or shallow water, but have the potential to be an effective hybrid (e.g.,
between monopoles and gravity bases). 4
Transitional Depth
In depths between 30 and 60 meters, wind turbine mounting systems require stiffer, wider bases (for
added rigidity and stability) with more than one anchor point. These types of mounting systems are
already standard in the oil & gas industries, but have not often been used in offshore wind projects.
Figure 6 shows an array of potential transitional depth mounting technologies. 5
Wind turbines at transitional depths are not yet well-tested in the United States, but a handful of small
projects are currently in operation in Europe. In particular, the Beatrice project in the Beatrice Oilfield
off of Moray Firth, UK, is installed at a depth of between 40-45 meters. This project has only two 5-MW
REpower turbines for a total of 10 MW of capacity. 6 The Beatrice project uses a mounting technology,
developed by OWEC Tower AS, similar to the fourth tower design shown in Figure 6 (e.g., a submerged
jacket structure with transition to a tube tower). 7 In addition the Alpha Ventus project north of Borkum,
Germany is at a depth of
Figure 6
approximately 30 meters.
Transitional Depth Mounting Technologies
This project has twelve 5-MW
Multibrid and REpower
turbines for a total of 60 MW
of capacity. 8 The Alpha
Ventus project uses a
mounting technology similar
to the first tower design
shown in Figure 6 (e.g., a
tripod tower). 9
Deep Water
Beyond 60 meters in depth, as
yet unproven floating
mounting structures become
necessary for wind
development. The range of
possible configurations for 1- Tripod Tower 4 - Submerged jacket with transition to tube tower
2 - Guyed monopole 5 - Enhanced suction bucket or gra vity base
floating structures includes 3 - Full-height jacket (truss)
some very similar to those in
Source: W. Musial, S. Butterfield, B. Ram, B., “Energy from Offshore Wind,” NREL &
use already for securing oilrigs Energetics, Presented at Offshore Technology Conference, Houston, Texas, May 2006.
to the sea floor. Figure 7


depicts an array of potential transitional depth mounting technologies. 10
While there are no operational floating wind turbines in the United States, the first test project with a
floating turbine, named Hywind, was brought online by StatoilHydro on September 8, 2009, near
Karmoy, Norway. The Hywind
project has just one 3 MW Figure 7
Siemens turbine that is located at Deep Water Mounting Technologies
a depth of about 100 meters. The
Hywind project uses a mounting
technology somewhat similar to
the third tower design shown in
Figure 7, but with only one tier of
guy-wires (three wires total). 11

Offshore Wind Resource

As discussed further below, the
estimates of wind resource
potential in the waters off the
shore of Massachusetts, and New
England in general, have varied
in recent years, in part as a result
of differing assumptions and
1- Semi-submersible Dutch tri-floater 4 - Three-arm mono-hull tension leg platform (TLP)
differing measurements taken at
2 - Barge 5 - Concrete TLP with gravity anchor
different points in time. 3 - Spar-buoy with two tiers of guy-wires 6 - Deep water spar
Source: Energy from Offshore Wind; W. Musial, S. Butterfield, B. Ram; NREL &
New England Wind Resources Energetics; Presented at Offshore Technology Conference, Houston, Texas, May 2006.
In addition, assumptions about
siting constraints greatly affect wind resource potential estimates. In 2008, in a study prepared for ISO-
NE as part of its recent planning studies known as the “New England Governors’ Economic Blueprint,”
Levitan & Associates estimated that, assuming no siting constraints, New England possesses
approximately 73,000 MW (or 73 gigawatts (“GW”) of potential offshore wind resources in water of 30
meters or less in depth. 12 The Levitan & Associates wind study was included in the “New England 2030
Power System Study,” prepared by ISO-NE as support for the New England Governors’ 2009 economic
study request. Overall, this study intended to analyze the impact of integrating large-scale wind resources
into the New England grid.
According to this assessment, these resources are accessible with current technology. While the majority
of New England’s wind resources are estimated to be located off the coast of Massachusetts, Rhode
Island and Maine also have good wind resources, with approximately 19 GW and 4.3 GW respectively. 13
In the case of Maine, most of its wind resources are located in water deeper than 30 meters making it
tougher to access them using current technology, and making the above estimate an understatement as
mounting technologies improve over time. A University of Maine study estimates that there is potentially


149 GW of wind potential in the area within 50 miles from the Maine coast, 14 but this potential will not
be realized without new mounting technologies.
Massachusetts Wind Resources:
As mentioned above, Massachusetts offshore waters are home to the best wind resources in New England.
Assuming no siting constraints and extrapolating from the Levitan & Associates analysis performed for
the ISO-NE in 2008, Massachusetts may have at least 49 GW of potential wind resources in water 30
meters or less, which could be accessed today with current technology. 15 Off-shore wind is expected to
have much higher output during on-peak periods and higher capacity factors more generally, as compared
to on-shore wind in New England. 16
When potential near-shore siting constraints are taken into account, the estimates of resource potential are
much smaller, though they still vary considerably. 17 One of the scenarios from the Levitan & Associates
study conservatively excludes areas within three miles of the shoreline, based on an assumption that siting
constraints will be too severe in this area for wind development. Taking this constraint into account,
Massachusetts’ offshore wind resource potential, accessible with current technology, may be about 3 GW
for depths up to 30 meters. 18 Levitan & Associates also generated a scenario that does not exclude
inshore areas but still considers general siting constraints, and puts the Commonwealth’s offshore wind
potential at about 16 GW for water with depth of 30 meters or less. 19 Similarly, the Massachusetts Ocean
Management Plan, described later in this report, cites an estimate that accounts for near-shore siting
constraints, and yields approximately 6.3 GW for waters 20 meters or less in depth. 20
As wind turbine mounting technology improves, deeper waters will become accessible to wind
development on more practical terms. When still considering potential siting constraints but no longer
constraining depth, there is more than 35 GW of wind resource capacity located within 20 miles of the
state’s shoreline. 21 This estimate is based on the ISO-NE study discussed above, as well as a study
published by the National Renewable Energy Laboratory (“NREL”) in 2004 focusing on the future
possibilities for offshore wind in the United States. Looking even further toward the future, NREL
estimates suggest that there may be in excess of 200 GW of potential wind resources in water with depth
of greater than 30 meters off the coast of Massachusetts. 22
All of these estimates wind resource potential compare to New England’s existing electrical capacity of
34 GW as of the summer of 2009. 23

Economic and Environmental Benefits of Offshore Wind Development

Massachusetts’ offshore wind resources offer the citizens of the Commonwealth a source of low-carbon,
renewable energy, with the added benefit of providing jobs to the local economy. Numerous studies in
recent years have focused attention on the employment impacts associated with clean energy development
(such as investment in offshore wind resources).
For example, a 2007 NREL study examined the feasibility and implications of having wind account for
20 percent of U.S. electricity demand by 2030. The scenarios suggest that investment in offshore wind
would create a large number of jobs in the U.S. and avoid a significant amount of GHG emissions and
other criteria pollutants. (These impacts are summarized in Table 1, below.)


Table 1
Potential Benefits of Large Amounts of Wind Energy in the U.S.
Type of Benefit Basis At 54 GW At 78 GW

Energy Supplied 40% capacity factor 187 TWh 273 TWh

Percent of Current U.S. Electric 2548 TWh consumed
5.30% 7.70%
Supply (2004)
Potential Jobs created during
39,000 jobs/year/GW 2,110,680 jobs/year 3,040,830 job/year
Construction Phase
Potential jobs created Permanent
1,100 jobs/GW 59,532 jobs 85,767 jobs
Capital Invested $1800/kW – $1500/kW $97.4 billion $124.8 billion

SO2 Avoided (Metric tons/year) 9.26 tons/yr/MW 501,151 722,002

NOX Avoided (Metric tons/year) 3.29 tons/yr/MW 178,054 256,521

CO2 Avoided (Metric tons/year) 3,281 tons/yr/MW 177,567,720 255,819,570

Source: W. Musial, “Offshore Wind Electricity: A Viable Energy Option for Coastal United States,” NWTC/NREL,
Marine Technology Society Journal, Fall 2007.

A scenario under which 78 GW of wind power were installed in the U.S. predicted that: approximately 3
million short-term jobs would be created nationally during the construction phase; over 85,000 operating
and maintenance jobs would be created; and over 250 million metric tons of CO2, 720,000 metric tons of
SO2, and over 250,000 metric tons of NOX would be avoided annually. 24
With some of the best offshore wind resources in the country, Massachusetts stands to obtain significant
economic and environmental benefits from wind development. In March 2009, the U.S. Department of
Energy (“DOE”) estimated that the cumulative economic impact from just 1,000 MW of wind power in
the state would amount to $1.4 billion in economic benefit, annual CO2 reductions of 2.6 million tons,
annual water savings of 1.3 billion gallons, 3,251 new local jobs added during construction, and 462 new
local long-term jobs added. 25 These are summarized in Figure 8 (which is from the DOE report).
According to a recent study prepared by researchers at the University of Massachusetts at Amherst of
economic benefits from clean energy investments, wind power development provides significant direct
job creation. Investment in wind projects provides 157 percent higher direct and indirect job creation
than in the oil and natural gas production sectors. 26 Wind power projects provide 88 percent domestic
content as a share of total industry output (i.e., the portion of economic activity related to the investment
that takes place in the U.S.), which is 5 percentage points higher than investments in the oil and natural
gas industries. 27


Wind development has moved into a new phase in recent years. There has been a significant increase in
the demand for and supply of wind projects in various parts of the country. In 2008, the U.S. market
added over 8,500 MW of new wind
capacity, increasing the nation’s Figure 8
cumulative total by 50 percent to
over 25,300 MW and pushing the
U.S. above Germany as the country
with the largest amount of wind
power capacity installed. 28 The new
wind capacity added in the U.S. in
2008 represented 42 percent of all
generating capacity entering
commercial operations in 2008, and
up from 35 percent of all capacity
additions in 2007. 29 During the first
four months of 2009 alone, over
3,200 MW of new wind capacity
was installed, bringing the total
installed capacity to over 28,000
MW. By contrast, during the prior
decade, nearly all of the generating
capacity added in the U.S. was at
power plants that use natural gas as
the primary fuel.
Source: DOE Wind Benefits Report, March 31, 2009.
There are many reasons (apart from
the raw abundance of the wind resource itself) why wind project development has increased dramatically
in recent years. Among the more important ones are:
• Manufacturing and technological improvements that have generally lowered the cost of wind
turbines. This is a significant trend from the vantage point of the past decade, even taking into
account the fact that there were relatively small cost increases in the past few years in light of
increases in the prices of various commodities used in the manufacturing of equipment for wind
turbines and installations.
Wind project installed costs declined dramatically from the beginnings of the
industry in California in the 1980s to the early 2000s, falling by roughly
$2,700/kW over this period.[fn] More recently, however, costs have
increased. Among the sample of projects built in 2007…[the average
reported installed cost] is up $140/kW (9%) from the average cost of
installed projects in 2006 ($1,570/kW), and up roughly $370/kW (27%) from
the average cost of projects installed from 2001 through 2003. 30
• Relatively high energy prices that increase the economic attractiveness of generating projects
(like wind turbines) that otherwise have high capital costs and low fuel costs. Fossil fuel prices
rose significantly during the past decade. The price of oil – used to provide peaking electrical


power in many parts of the country and thus affecting the price of power on the margin – is now
nearly six times the level it was a decade ago. 31 Similarly, natural gas prices rose sharply from
1999 to 2008. The average price of natural gas for power generation was $2.67 per mcf of gas in
1999, compared to $9.11 per mcf in 2008 (3.5 times the 1999 level). At their height in June 2008,
natural gas prices averaged $12.17 per mcf during the month of June 2008. 32 Even the price of
coal – the fuel used to produce approximately half of the power in the U.S. – rose by 80 percent
from 1999 through August 2009 (from $ 24.72 to $44.67 per ton of coal). 33 While prices of
natural gas and oil have dropped in 2009 relative to 2008, the rising fossil-fuel prices over most
of the period since 1999 has increased electricity prices – and thus helped to stimulate the
economic investment in renewable fuels that compete with other sources of electricity.
• Investment incentives (such as the federal production tax credit, the investment tax credit, and
other similar state-specific incentives) have spurred wind development). These provided
investment support for wind and other renewable power development in recent years. Under
present law, an income tax credit is allowed for the production of electricity from qualified wind
energy facilities and other sources of renewable energy. The current value of the credit is 2.1
cents/KWh of electricity produced. The credit was created under the Energy Policy Act of 1992
(at the value of 1.5 cents/KWh, which has since been adjusted annually for inflation) and applies
to electricity produced by a qualified wind facility placed in service after December 31, 1992, and
on or before December 31, 2012. The production tax credit (“PTC”) is only applicable to utility-
scale wind turbines, not smaller turbines used to power individual homes or businesses. The PTC
was scheduled to expire on December 31, 2008, but the American Recovery and Reinvestment
Act (“ARRA”), passed in February 2009, extended the credit for three additional years. Since its
establishment in 1992, the PTC has undergone a series of one- or two-year extensions, and has
been allowed to lapse in three different years: 1999, 2001 and 2003. The federal government’s
uninterrupted commitment to the PTC from 2005 through the present has given the industry a
steady base to build upon, enabling four straight years of growth. The most impressive expansion
of the wind industry was seen in 2008, when a record 8,500 MW of new wind power capacity
was added. 34
• Technological improvements in wind turbines. Output from wind turbines has been progressively
improving through higher capacity factors.
In the best wind resource areas, capacity factors in excess of 40% are
increasingly common. Of the 112 projects in the sample installed prior to 2004,
for example, only 4 (3.6%) had capacity factors in excess of 40% in 2007 (in
capacity terms, 56 MW, or 1%, exceeded 40%). Of the 58 projects installed from
2004 through 2006, on the other hand, 15 (25.9%) achieved capacity factors in
excess of 40% in 2007 (in capacity terms, 836 MW, or 16.7%, exceeded 40%).
These increases in capacity factors over time suggest that improved turbine
designs, higher hub heights, and/or improved siting are outweighing the
otherwise-presumed trend towards lower-value wind resource sites as the best
locations are developed. 35
• The adoption of renewable energy-related requirements (e.g., the Renewable Portfolio Standard
(“RPS”)) in many states that has created more demand for renewable power.


In recent years, the demand for renewable electricity has accelerated as a
consequence of state and federal policies and the growth of voluntary green power
purchase markets, along with the generally improving economics of renewable
energy development. The National Renewable Energy Laboratory (NREL)[fn]
estimates that U.S. green power sales totaled 8.5 million MWh in 2005 and
approximately 12 million MWh in 2006. The 2006 figure represents a three-fold
increase from just three years earlier.[fn] The U.S. Environmental Protection
Agency’s (EPA) Green Power Partnership has helped spur the phenomenal growth
in commercial customer purchases, from less than 400,000 MWh in annual purchase
commitments in 2001 to nearly 7 million MWh in 2006, an 18-fold increase in just
five years.[fn] At the same time, 25 states plus the District of Columbia have
enacted renewable portfolio standards (RPS) requirements ranging from 2% to 30%
of total electricity supply, to be achieved over the next five to 15 years. However,
U.S. non-hydro renewable electricity generation provided only about 2.3% of the
total U.S. electricity supply in 2005. And global demand for renewable energy
equipment is already leading to supply shortages for wind turbines and photovoltaic
modules. 36
• The design of certain wholesale power markets (e.g., in New England, New York, Texas, and
parts of the Midwest) that provide both transmission access with a single region-wide
transmission rate, and a “single-clearing price” energy pricing structure supports wind
Well-structured regional wholesale electricity markets operated independently
allow far greater amounts of renewable energy and demand response resources
to be integrated into the nation’s electric grid. In fact, approximately 73 percent
of installed wind capacity is now located in regions with such markets, while
only 44 percent of wind energy potential is found in these areas. Large, regional
energy markets provide for cost-effective balancing of generation and load with
significant penetrations of variable, non-dispatchable power sources, and they
facilitate delivery of resources remote from load centers. A summary of utility
industry research by the Utility Wind Integration Group ( states
that ‘well-functioning hour-ahead and day-ahead markets provide the best
means of addressing the variability in wind plant output.’ Further,
‘consolidation of balancing areas or the use of dynamic scheduling can improve
system reliability and reduce the cost of integrating additional wind generation
into electric system operation. 37
• The expectation that the nation’s requirements for electricity production with a lower carbon
footprint cannot be accomplished without significantly greater reliance on wind energy.
Without utility-scale wind, solar and geothermal facilities and adequate transmission
access, we won’t be able to meet future energy demand, much less reduce carbon
emissions to levels needed to avoid the damaging effects of climate change. 38


Typically, though, wind is located where people (i.e., electricity consumers) generally are not. This
means that wind power development and deployment are inextricably tied to electric transmission. Thus,
to realize the significant near-term potential for wind power development, new transmission will be
needed. (This is true for wind in the center of the nation, on mountain ridges and in offshore areas.)



Over the past several years, Massachusetts policy makers have come to appreciate the valuable energy
and economic-development resource that stands in the waters just off of the state’s coastline. Governor
Deval Patrick identified wind power as “a centerpiece of the clean-energy economy we are creating for
Massachusetts” 39 and the legislature has complemented this effort by adopting a series of new laws that
have created a fertile environment for wind power development in the state.
In 2008 alone, the Massachusetts legislature enacted four laws that will positively impact the
development of offshore wind. Enacted in May of 2008, the Oceans Act requires the development of a
first-in-the-nation comprehensive management plan for Massachusetts’s state waters (extending three
miles out from the shoreline), and includes among its goals the requirement that the plan “foster
sustainable uses that capitalize on economic opportunity without significant detriment to the ecology or
natural beauty of the ocean.” The Oceans Act creates a 17-member ocean advisory commission to advise
the Secretary of Energy and Environmental Affairs in developing the management plan, amends the
Ocean Sanctuaries Act to allow for the siting of “appropriate scale” wind, wave, and tidal power in state
waters (except for the Cape Cod Ocean Sanctuary), and is part of a plan to balance new and traditional
uses of the ocean with preservation of natural resources. 40
Signed in July 2008, The Green Communities Act is a comprehensive energy reform bill that accelerates
the rate of increase in the proportion of renewable energy to total generation required of all electricity
suppliers under the state’s RPS. The result is an increase from 4 percent of sales to 15 percent by 2020,
and a revised goal that 20 percent of all electricity come from renewable and alternative sources also by
2020. The Act also requires utilities to enter into long-term (10 to 15 years) power purchase contracts
with the developers of renewable energy projects, with the intention of improving the economics of and
financing for renewable projects. In addition, the Act modifies other authorities: for example, the state
Division of Energy Resources is expanded and elevated into the Department of Energy Resources, and
now includes a Green Communities Division to provide technical and financial assistance to
municipalities for energy efficiency and renewable energy efforts. The program will receive $10 million
annually in funding from a variety of sources to further these efforts. Lastly, recognizing that siting is
frequently an obstacle to renewable energy development, the Act creates an energy facilities siting
commission to review, in part, “whether current laws and regulations do not adequately facilitate the
siting of renewable and alternative energy facilities” to propose changes.
Signed in August 2008, the Green Jobs Act furthers the growth of the clean energy industry in the state by
providing support for research and development, entrepreneurship, and workforce development. The Act
directed millions of state dollars toward growing the local alternative-energy sector, by providing funding


for seed grants to companies, universities, and nonprofits; workforce development grants to state higher
education facilities, vocational schools, and nonprofits; and by providing low-income job training. In
addition, the Act created the MCEC, which aims to support the clean energy sector through direct
investments in new and existing clean energy companies, providing assistance enabling companies to
access capital and other resources for growth, and promoting training programs to build an energy
workforce. 41
Last but not least, also signed in August 2008, the Global Warming Solutions Act requires the reduction
of GHG emissions by 80 percent of 1990 levels by 2050, with a reduction of up to 25 percent by 2020.
The Act establishes statewide and regional registries of greenhouse gas emissions, and calls upon the
Massachusetts Department of Environmental Protection to determine the baseline emissions level of 1990
and calculate the expected 2020 emissions levels if no new controls were imposed after January 1, 2009
(the “business as usual” level). The Secretary of Energy and Environmental Affairs will set a 2020
emissions limit between 10 percent and 25 percent below 1990 levels, and by January 1, 2011 adopt a
plan for meeting that limit. The Secretary will also set 2030 and 2040 limits, leading up to the required
80 percent reduction by 2050. This gradual reduction of emissions levels will spur innovation and
entrepreneurship in clean energy technologies, including offshore wind, in the state. 42
The Patrick Administration has made strong efforts to support development of the state’s rich wind
resource. On January 13, 2009, Governor Patrick announced a goal of developing 2,000 MW of wind
power capacity – enough to power 800,000 Massachusetts homes – by 2020. Governor Patrick also
directed the Secretary of Energy and Environmental Affairs to use the 2,000 MW wind goal, as well as
the mandates and incentives provided by the various clean energy statutes enacted in 2008, to guide the
state’s efforts to dramatically increase the development and deployment of clean, renewable wind power
in the coming years. Installing 2,000 MW of wind capacity would meet an estimated 10 percent of the
state’s current electric load, and by displacing electricity generated by fossil fuels, use of wind turbines on
this scale would reduce greenhouse gas emissions by 3.1 million tons, or roughly 12 percent of emissions
from power plants today. 43
In testimony before a congressional committee in March 2009, the Massachusetts Secretary of Energy
and Environmental Affairs, Ian Bowles, highlighted that “The East Coast is a different matter. Here,
offshore wind is superior to remote onshore wind in terms of resource size, distribution, capacity factor,
reliability, minimization of environmental impact, and – this is the key – proximity to population centers.
This enormous energy resource is located just a short distance from the major load centers of the East
Coast, but unlike on-land wind, tapping it will require development and policy assistance to get it over the
commercialization hurdle. We will fail as a nation if we do not take this moment in our history – a time
of aggressive federal funding and policymaking for sustainable energy development – to capture this
resource once and for all for the benefit of current and future generations.” 44
On May 12, 2009 U.S. Secretary of Energy Steven Chu announced the selection of Massachusetts as one
of two Wind Technology Testing Centers in the country to receive $25 million in funding from the
American Recovery and Reinvestment Act. 45 The Center (located in Charlestown and originally
designated under a 2007 initiative) will test commercial-sized wind turbine blades to increase reliability,
reduce cost, facilitate other technical advancements and speed deployment of the next generation of wind
turbine blades into the marketplace. The Center will be the first commercial large blade test facility in the
nation to allow testing of blades longer than 50 meters (which currently can be performed in Europe but


not in the United States) and in fact will be equipped to assess turbine blades up to 90 meters long - nearly
the length of a football field. The Center, the groundbreaking for which was celebrated on December 1,
2009, will be operated in partnership with NREL. 46
A senior Massachusetts state official, Greg Watson (Senior Advisor to Secretary Bowles on Clean Energy
Technology and Vice President for Sustainable Development and Renewable Energy at the MTC), has
been an active player for years in launching the U.S. Offshore Wind Collaborative (“USOWC”) with
other entities, including the MTC, the U.S. DOE, and GE Wind Energy. The goal of USOWC is to
address the technical, environmental, economic, and regulatory issues necessary to catalyze the
sustainable development of offshore wind energy in the waters of the U.S. In recent months, Greg
Watson has said, “It would work both ways, right? You could export electricity from the Midwest to the
East, but you could also transport electricity from the coasts westward…We're just beginning to see that
we have both the potential and the need to organize the East Coast states, because all of a sudden, we
have a resource that's strategically important…We’ve been importing all of our energy. Now, all of a
sudden, we have a strategic resource, and it's plentiful.” 47 He has also noted “People are concerned about
the future of the oceans; in terms of the ecosystem…We think we have an argument to say that one of the
biggest challenges facing the ocean environment is climate change. And that the ocean can provide an
environment where some of the solutions to this can actually be sited if it's done right.” 48
Testifying before the U.S. House of Representatives in June 2009, Paul Hibbard, Chairman of the
Massachusetts Department of Public Utilities, stated that:
The very best wind resource in our country – from the perspectives of resource size,
distribution, capacity factor, reliability, proximity to population centers, and
minimization of environmental impact – is located a short distance off the major load
centers of the East Coast. For sure, offshore wind turbine installation may currently
cost more than onshore wind development, but better wind resource economics,
decreasing unit costs with increased development opportunities, and the absence of the
need for cross-country transmission could make offshore wind competitive with remote
wind farms. The higher cost of construction may well be more than offset by the
markedly lower cost of transmission... Given the sheer magnitude of this resource
potential so close to our nation’s major load centers, and the opportunity to have it
developed incrementally, disbursed geographically, and through many different
interconnections along the coast (improving power system reliability), we would miss
an enormous opportunity to not focus aggressively on its development, and we would
be making a grave mistake to preclude its development by overwhelming local markets
with a high volume of power from distant generation sources. 49
The MCEC has recently solicited a Port and Support Infrastructure Analysis for Offshore Energy
Development, which will analyze shore and port facilities with a view toward identifying appropriate port
facilities, estimating upgrades to make the locations suitable to support offshore energy development, and
quantifying economic impacts on the port area and surrounds. Report findings are expected by early
On December 2, 2009, Governor Patrick announced that National Grid and Cape Wind have agreed to
enter into negotiations for a long-term contract under which the utility would purchase the electricity


generated by Cape Wind. A power purchase agreement is reported to be a critical requirement for
financing Cape Wind, and getting it into construction and operation in time to qualify for federal
incentives under the ARRA that could reduce the cost of the project by 30 percent. 50
At the end of December 2009, Secretary Bowles published the Massachusetts Ocean Management Plan,
as directed by the Oceans Act. In this Plan, Secretary Bowles identified several areas of the state’s waters
for the development of commercial scale wind projects, and proposed a framework under which
“community scale” wind turbines could be sited Figure 9
in state ocean waters. The Plan’s designated Renewable Energy Areas,
areas for renewable energy are shown on Figure Including Adjacent Federal Waters
9. (In Figure 9, these areas are labeled “MREC
Proposed Areas” (which are areas designated
for renewable energy development, and open to
wind, wave, or tidal), “Proposed for
Designation and Feasibility Analysis,”
“Proposed for Screening and Feasibility
Analysis,” “Provisional Area,” and “Subject to
Screening for Potential Deepwater Sites.”)
As a frontrunner in such pursuits,
Massachusetts is still one of several states on
the Northeast Coast actively pursuing offshore
wind development. Several other states
stretching from Maine to Delaware are
exploring the feasibility of such projects off of
their shores. For example:
• In September 2009, Maine officials
announced that the state had identified
seven offshore areas that could be
suitable places for testing wind power
technology. Under a state law adopted
in June, state officials must, before
December 15, 2010, select at least one
and potentially as many as five sites for
test projects. One site will be
designated as a wind energy research
center operated by the University of
Maine. Private companies would be Source: Massachusetts Ocean Management Plan, December 2009.
sought to develop projects on any other
sites. 51
• In 2008, Rhode Island issued a request for proposals from offshore wind developers that could
contribute to providing at least 15 percent of the state’s electricity needs. Deepwater Wind was
subsequently selected as the winner and entered into a joint venture with the state, through which
Deepwater Wind will build an initial 20 MW test phase in state waters by 2012, with a


subsequent commercial phase adding 100 turbines in federal waters off of the Rhode Island coast.
The exact location of this wind farm has not yet been determined. It is expected that the results of
the Special Area Management Plan (“SAMP”) permitting process (due in 2010) will dictate
where the project will be located. 52

• In September 2009, the Maryland Energy Administration announced that it was soliciting interest
from wind developers to develop offshore wind facilities more than 12 miles off the state’s
coastline. Responses to the request for interest were due January 31, 2010 – to be announced
thereafter. 53

• In June 2008, Delaware officials announced that they modified the state’s renewable energy
credit (“REC”) system so that RECs from offshore wind energy would count at a relative value of
350 percent (compared to a typical 1-to-1 basis for RECs) toward the state’s RPS for utility
Delmarva Power & Light. (In-state customer-sited photovoltaic generation and fuel cells using
renewable fuels installed before 2014 also qualify for a greater than 1-to-1 REC multiplier in
Delaware). This act followed a separate announcement the day earlier that Bluewater Wind had
signed a 25-year contract with Delmarva Power to sell the utility up to 200 MW of power from an
offshore wind farm that will be built 11.5 miles off the coast of Delaware beginning as early as
2012. The contract was contingent upon the Delaware legislature changing the RPS to allow for
RECs coming from the offshore wind farm to be credited to Delmarva’s account at a rate of 350
percent per REC. 54


Massachusetts’ offshore wind resources are located in places relatively distant from the high-voltage
transmission grid that would be needed to move any wind-generated electricity to consumers. This means
that development of this rich wind power resource is inextricably tied to electric transmission which does
not yet exist in the vicinity of the windy areas offshore.
Thus, to realize the significant near-term potential for
wind power development, new transmission will be
It is well understood, however, that in the current
framework for transmission investment, wind
development and transmission expansion suffers from
a classic chicken-and-egg problem. Most transmission
facilities tend to be added by transmission companies
where needed to assure that customers continue to
receive reliable electricity service. Sometimes
transmission is planned and built to enable new power
plant facilities to deliver their power to customers, and
typically transmission utilities are willing to invest in
such facilities because they can be assured of
recouping their investment from the consumers who


benefit from the transmission enhancements.
By contrast, transmission companies typically have little interest in building transmission infrastructure in
areas where there are no power plants or little power demand because of concerns about who will pay for
their transmission investment. Similarly, there tends to be little interest in building renewable generating
capacity in remote areas with little power demand and no transmission infrastructure to move power to
load centers, since without transmission there is no way to deliver their power to customers. This
problem is particularly pronounced in renewable-rich areas which are remote and distant from customer
Each piece of potentially costly infrastructure – the wind project developments themselves, and the
transmission projects to service them – wants the other to be developed first. Without more creative
mechanisms to plan for and provide investment recovery than currently exist, the situation may well
remain a stalemate: wind projects cannot really proceed without transmission access; and transmission
investment does not tend to proceed without assurances that wind projects will develop, and that the
transmission investment costs can be repaid by the beneficiaries of the facilities.
As shown in Figure 10, which depicts the infrastructure that currently exists in Massachusetts’ ocean
waters, there is little transmission already built in the offshore state (or federal) ocean. This is generally
true, but it is particularly the case in the areas that the Massachusetts Ocean Management Plan has
designated as appropriate for commercial-scale wind facilities. Except for the cables that connect the
Island of Nantucket with the electric grid on Cape Cod, there is a dearth of transmission leading to the
areas that offer significant wind resources.
Without some way to break the chicken-and-egg problem, development of these windy offshore areas for
power generation may end up in a stall. The current transmission framework in New England (described
in Section 5) does not on its own solve the problem. Some other regions with significant wind power
potential have attempted to crack the chicken-and-egg problem in ways that provide helpful insights for
Massachusetts (described in Section 6).


Figure 10
Utility Infrastructure Located in Massachusetts’ Ocean Waters

Note: Cables represent identified, specific routes. Cable areas do not refer to specific routes and are as
reported by the National Oceanic and Atmospheric Administration.
Source: Draft Massachusetts Ocean Management Plan, June 2009, Figure 2-10.



For more than a decade, the high-voltage, interstate transmission system in the six New England states
has been managed by a single, independent system operator: ISO-New England. The individual
transmission lines, substations and other facilities of the high-voltage grid are actually owned and
maintained by the region’s transmission utilities, including National Grid (with facilities in parts of
Massachusetts, New Hampshire and Rhode Island), Northeast Utilities (with facilities in parts of
Massachusetts, Connecticut, and New Hampshire), NSTAR (with facilities in Massachusetts), and other
transmission utility companies. (Figure 11 shows the locations of the high-voltage transmission system in
New England, including transmission projects now approved.)
However, a variety of functions that relate to the adequacy of, use of, and investment recovery for the
high-voltage transmission system come under the responsibility of ISO-NE. Among others, these
functions include transmission system planning, studies for interconnecting transmission and generating
facilities (including wind power projects) to the regional high-voltage transmission system, and the
administration of the regional transmission tariff. ISO-NE’s tariff governs the terms, conditions and
charges under which anyone may have access to and use the transmission facilities owned by the
transmission companies, and collects funds to repay the owners for their investment in transmission
facilities. As an operator of an interstate transmission system, ISO-NE is regulated by the Federal Energy
Regulatory Commission (“FERC”).
Historically and until recently, most of the region’s high-voltage transmission facilities were built as part
of large power generating projects and efforts to interconnect various parts of New England into a single
interconnected system. Many utilities jointly planned generation and transmission projects together.
However, with the gradual adoption of non-discriminatory “open access” transmission policies by the
FERC since the early 1990s, and as a result of the restructuring of the electric industry in five of the six
New England states during the late 1990s, most of the planning and investment in transmission
infrastructure has been in parallel with, rather than in collaboration with, planning for generation
In the past few years, the ISO-NE and transmission companies have undertaken major investment in
transmission infrastructure across the New England region. For the most part, regional reliability needs –
as compared to economic development or investments to lower overall electricity costs – have driven
most of this new infrastructure development. As of mid-2009, the cumulative investment in new
transmission since 2002 was estimated to be $3.962 billion region-wide. 55
Under the current tariff rules for adding transmission in New England, there are several types of facilities
– each of which has a different set of investment recovery policies. “Regional Benefit Upgrades” are
transmission upgrades for the high-voltage system (i.e., 115 kV and above) that have been incorporated
into the ISO-NE Regional System Plan. This plan identifies facilities that are: (a) “Reliability
Transmission Upgrades” (those necessary to ensure the continued reliability of the New England
transmission system, after making certain assumptions about the size, timing and location of growth in
customer demand and changes in the sources of supply); and (b) “Market Efficiency Transmission
Upgrades” (those designed primarily to lower the cost to produce power in the region (i.e., where the
carrying costs of the transmission project are lower than the reduction in the region’s total production


cost)). The ISO-NE tariff recovers the costs of such Reliability and Market Efficiency Transmission
Upgrades from all electricity customers that use transmission service in the region, and allocates the costs
to customers according to the size of their electricity use (relative to total regional customer load).
Some other transmission facilities in New England are considered to be “Local Benefit Upgrades” whose
costs are assigned to the electricity Figure 11
provider (who in turn passes these costs High-Voltage Transmission System in New England
along to its customers) in a particular
subregion of New England. Finally, there
are some specific projects funded directly
by the sponsor or “the participant;” these
include interconnection facilities (e.g.,
those that link a power plant to the high-
voltage transmission facility), “merchant
power lines” or other voluntary “elective”
transmission upgrades – all of which have
costs that are paid for directly by the
participants of the project (i.e., the direct
beneficiaries of these projects).
Under these policies and tariff rules, it is
generally understood that transmission
facilities that are needed to connect a wind
farm – whether located in an offshore
area, or on a terrestrial site – to the New
England high-voltage Pool Transmission
Facility System (“PTF System”), would
have to be paid for as a participant funded
cost (e.g., interconnection facility).
Therefore, New England’s regional
transmission cost-recovery rules anticipate
that the developer/investor in the offshore
wind project would directly absorb the Source: New England 2030 Power System Study: Preliminary Maps
costs of the transmission facilities needed and Cost Estimates for Potential Transmission; ISO-NE Planning
Advisory Committee; August 14, 2009.
to connect to the onshore high-voltage
system – a situation that resembles the chicken-and-egg stalemate described above.
Over the past year, and at the request of the region’s Governors, the ISO-NE has carried out studies that
explore the implications for the region’s on-shore PTF transmission system of importing large quantities
of renewable energy, of building it within the region, or of bringing it to loads from offshore locations in
the region. This study is described in Section 7 of this report.



Transmission Models for Wind Power: Key Concepts and Distinctions

There are several different approaches that have been used in parts of the U.S. and Europe to provide
transmission facilities in advance of wind power development, thereby breaking the chicken-and-egg
problem. Typically in these approaches, the provider of transmission facilities (and investment) is
separate from the wind power developer (and investor). Often, but not always, the transmission provider
is a utility company; usually, the wind project is developed by another entity (or more than one developer,
where a transmission system supports multiple wind farms). The electricity produced by the wind farm is
typically then sold to a third party.
Both transmission and wind power facilities are capital-intensive projects: they have relatively high up-
front costs and relatively low ongoing operating costs. They tend to exhibit economies of scale, such that
it may be more expensive in the long run to build multiple small transmission facilities to support a large
number of wind projects, as compared to initially building a larger, higher-capacity, higher-voltage
transmission system that can accommodate large transfers of wind-generated electricity. That approach,
however, can break the financial back of the first wind project, if it is expected to carry the cost of a
transmission project that is scaled for many subsequent wind projects over time. This creates the
inevitable stalemate under traditional transmission cost-recovery policy.
Thus, the chicken-and-egg problem intersects with a complex set of other questions important for any
transmission-development framework for wind:
ƒ Is the provision of a transmission system to provide access to a windy area a “public good” – just
as development of roads is considered a classic function of government, to support commerce,
economic development, and quality of life? Or is it a private good, in the same way that
traditional transmission-system investment is deemed to be provided for the use and benefit of
electricity customers who buy electricity service?
ƒ Who benefits from providing access for wind power development? All electricity consumers in
the state, given the state’s RPS requirement? The eventual buyers of power from the projects?
All taxpayers in the state, given the new tax revenues that will accrue from jobs, economic
development, and potential royalties paid to the state as a result of the development? The
developer, investors, lenders, and/or owners of the wind farm, who stand to benefit financially
from the project? Electricity customers in a larger region who are able to obtain renewable
energy within the Northeast? All of these groups, in different ways? Only some constituencies?
ƒ Who should pay for transmission facilities that need to be built to connect offshore wind farms to
the mainland’s electric grid? The wind developer? The buyer of power? The broader set of
customers in the larger regional market? Some combination of all of these parties?
ƒ How should payments be structured to assure the transmission developer that it will recover its
investment costs if it builds a line and puts it into service in advance of the completion of the
wind farm – and perhaps well in advance of a sufficient number of wind turbines to fully utilize
the line’s capacity?


ƒ If there is a region with significant potential to build multiple wind projects over time, then what
framework (if any) is in place to encourage efficient development of transmission facilities that
can support more than a single wind farm?
ƒ Who should decide who pays for the offshore transmission investment to connect the wind farms
to the grid? The parties that voluntarily contract to develop and build the facilities, in the event
that they are part of a merchant transmission line? The state utility regulator (e.g., the
Massachusetts Department of Public Utilities), in the event that the offshore transmission
facilities are considered jurisdictional investment, not part of the regional transmission tariff?
The federal utility regulator (i.e., FERC), in the event that the facility is deemed part of the
region’s high-voltage system? The state legislature, in the event that the state’s taxpayers were
viewed as the project’s beneficiaries?
The approaches that others have taken in answering these questions are summarized below.
Who pays? Based on the experience in various regions of the country, the answers tend to fit into two
basic approaches: In one, often called the “participant funded” or “direct assignment” model, the costs of
transmission are assigned to and recovered from only those parties that directly benefit from the
incremental transmission investment. Under the direct assignment model, transmission investment costs
tend to be allocated to beneficiaries in proportion to the amount of benefits they receive. In other words,
those who benefit the most from the transmission investment will bear the most cost. Under some
regions’ policies, beneficiaries (i.e., those being assigned – either directly or indirectly – the costs of
transmission investment) may be the developers of wind projects, who in turn pass along these costs to
buyers of their renewable power on a “delivered electricity price” basis (often referred to as a “merchant”
approach to investment recovery). Alternatively, the beneficiaries may be the customers of a utility that
has a requirement to buy renewable power and who support that utility’s incremental investment required
to deliver that power to them. These “benefitting” customers pick up the transmission costs directly,
rather than having the costs embedded into the price of the renewable power.
By contrast, the other approach to the question of “who pays” involves a more uniform assignment of
transmission costs across a wider region. This approach is often called a “socialized” investment-recovery
model. Everyone (e.g., all buyers of electricity in a wide region) picks up the cost of the transmission
investment. Typically under a socialized cost-allocation model, the cost of transmission investment is
distributed on a uniform basis (typically $/kW) among all market participants, such that those who use the
most electric resources will bear the most cost.
To date, there are some instances (see below for Texas and Southern California Edison (“SCE”)) in which
“beneficiaries” of transmission facilities for wind are considered to be the broad group of electricity
customers in a regional power market or a utility’s service territory or region, in light of a public policy
requiring reliance on renewable energy as a part of the electricity supply mix sold in the state. Where this
is true, the costs tend to be broadly socialized, since all of the customers are considered beneficiaries of
the transmission built to support wind power development.
How are payments structured? There tend to be two different systems under which the users of
transmission (e.g., either the wind developer, or the electricity buyer) repay the transmission provider for
making the investment in transmission facilities. One is a tariff payment system, and the other is a
contract-based payment system.


Tariffed rates are assigned to users of an electric system, with all customers who buy power under similar
terms and conditions of service paying a similar rate. Rates may vary, depending upon the size of the
customer’s demand on the system, or the quality of the service (e.g., whether it is firm service or can be
interrupted under certain circumstances). The tariffed rates are structured so that they recover the cost of
providing the service: that is, so that the investment costs and operating costs are repaid to the
transmission provider. The tariff must be approved by a utility regulator, and establishes the terms under
which a customer seeking to obtain transmission service would be able to obtain it. Depending upon how
the tariff is structured, rates may be socialized across all customers in that electric system, or the costs of
certain transmission facilities may be assigned only to a subset of customers (e.g., those deemed to benefit
from those facilities).
By contrast, under contract-based investment recovery, the buyer of a service (e.g., use of transmission)
enters into an agreement with the seller of the service (e.g., provision of transmission), and that agreement
establishes the terms, conditions and price of service. The contract establishes the rights, obligations, and
assignment of risks between the parties. For example, a utility that buys power from a wind farm in order
to meet its RPS requirements may enter into a contract with a transmission provider to build transmission
facilities to connect the wind farm to the utility’s service territory. The contract sets forth the rights over
the capacity on the line, the support payments, and other aspects of service. Contract-based investment
recovery is typically associated with a merchant cost-allocation model.
There are some rare instances where wind power-related transmission costs are socialized in light of the
facilities’ “strategic benefits,” as much as for their reliability benefits or economic savings for power
production. A prime example is a set of high-voltage facilities proposed to be built in windy areas of
Kansas, Oklahoma, and the northern part of Texas (in the Southwest Power Pool (“SPP”) region). These
transmission lines are seen as needed largely to enable in-region wind power to be developed and resold
to out-of-region customers. The strategic benefits include some not typically taken into account in
transmission planning studies, including economic development objectives for renewable resources, fuel
diversity, air emissions reduction, and reduction in vulnerability to extreme events on the grid. That said,
this approach looks to electricity customers – more than taxpayers – to support these strategic benefits.
How are economic development benefits supported? To date, most policy support aimed at stimulating
investment in renewable energy for economic development purposes has focused on the renewable energy
end of the renewable/transmission spectrum. These public policies endeavor to facilitate the creation of
markets for renewable power (e.g., through the RPS and the related markets for renewable energy
credits); developing advanced technologies for renewable energy (e.g., through research and
development); and through long-term contracting (e.g., for power from a particular project). These
investment-stimulus policies do not tend to focus on supporting the transmission projects needed to
upgrade the grid to move renewable power over long distances to consumers.
Some states, like North Dakota, provide a number of incentives (e.g., corporate renewable energy tax
credits; reductions and/or exemptions from property taxes) directed toward wind generation projects,
rather than toward the transmission facilities they require. Some states, like California and New York,
have supported research and development on transmission gaps for renewable energy; on ways to
characterize the benefits of transmission for renewables so that the benefits include more than traditional
reliability or low-cost power supply objectives; on issues related to integrating non-dispatchable
renewable energy into the grid; and so forth. However, there are few examples where transmission


investment has been specifically supported by economic development mechanisms – with certain notable
exceptions in the past (e.g., the establishment of the Tennessee Valley Authority) and in the present (e.g.,
the economic-stimulus funding for transmission projects that is part of the American Recovery and
Reinvestment Act). Instead, transmission investment strategies have tended to focus on the benefits
internal to the electric system rather than external economic development benefits like job creation, tax
benefits, royalty creation, or other such factors associated with investment in “public good” infrastructure
projects. Recent actions of FERC to support development of transmission projects designed to deliver
wind energy have fit squarely within the traditional framework of transmission cost recovery by users of
the transmission system (e.g., FERC’s 2009 decision to establish preliminary regulatory treatment of the
proposed multi-state Green Power Express project).

Overview of Transmission Cost-Recovery Models

In practice, there are only a few archetypal ways in which transmission projects tend to be designed with
respect to business models, user arrangements and investment-recovery approaches. For simplicity, these
can be thought of as “classic” approaches – the “classic” socialized utility transmission approach; the
“classic” merchant, contract-based approach; and the “classic” economic development transmission
model. The key elements of each are summarized in Table 2.
Even across these core approaches, there is variation. For example, within the “socialized” model, there
can be approaches that aim to support broad transmission expansion in support of wind generation with a
broad, socialized cost-recovery approach in which all electricity users in a region are considered
beneficiaries and all pay for the transmission investment (as in the Texas “CREZ” model). In another
approach where all the region’s electricity customers pay a common, socialized rate for transmission
upgrades (as in the SPP’s “Balanced Portfolio” model), the overall system plan was specifically
configured in a way to ensure that all electricity customers would receive net benefits (i.e., some
combination of reliability and power supply efficiencies) from the combination of power line upgrades.
These SPP upgrades included not only projects designed to deliver wind, but also other high voltage grid
enhancements as well. Even though in both of these cases (Texas CREZ and SPP’s portfolio) the projects
are being developed by transmission provider utilities, a clear “economic development” mandate
underpins the rationale for finding a way to have a broad set of customers support renewable power
development for the benefit of the region’s economy as well as for the electrical benefits that could result.


Table 2
Core-Transmission Cost-Recovery Models

“Classic” Socialized Transmission “Classic” Merchant Transmission “Classic” Economic Development

Model Model Transmission Model
(with utility-style tariff) (with contract) (with tariff or contract approach)
Core attributes: Core attributes Core attributes
• Transmission facility investment is • Transmission facility investment is ƒ Transmission facility investment is
driven by a utility’s (or state’s, or driven by interests of a specific entity driven by public authority with a mission
region’s) overall goal to provide (the “beneficiary”) willing to enter into that may go beyond activities related to
transmission access to a set of preferred a contract with a transmission provider electricity supply and delivery.
generation resources (e.g., expressed to get a line built. ƒ For example, the mission may include
through an RPS requirement that favors • For example, a buyer may seek access regional economic development, flood
purchases of renewable energy). to lower-cost supplies, and the cost of control, rural electrification. The public
• The beneficiaries are broadly defined by the line is worth it, given such potential authority is authorized to carry out
some entity (e.g., transmission planners), energy cost savings. A seller may seek investments to serve multiple missions
with approvals by a regulator. A access to a higher-cost market. with its customers paying rates that
collaborative planning approach may be recover the investment. Often the power
• A transmission provider makes the
used to identify the appropriate is subsidized, so the delivery facilities’
investment, with investment recovery
configuration of the proposed costs are bundled with the low-cost
covered in the contract terms. The costs
transmission enhancements. power.
of the line are not included in a
• In approving the tariff to recover the traditional regulated tariff. ƒ As a public entity, it typically has certain
costs of the transmission investment, the attributes that other entities lack:
• Access to the line is typically
regulator identifies those classes of “controllable” (e.g., using direct-current ƒ It may be able to access low-
customers that benefit from the (“DC”) transmission technology), with cost capital (e.g., where bond
investment, the costs that will be the paying party having rights to the covenants require it to set
assigned to them, and the design of the line’s capacity, while others do not. rates to recover its investment
tariff to recover those cost. The tariff costs)
recovers the investment costs, and may • Regulators (e.g., FERC; state siting
regulators) have approved certain ƒ It may set its own rates; not
apply to the seller (e.g., wind facility) or
merchant lines (under the contract subject to state or federal rate
user (e.g., electricity customer).
model) when the parties to the contract regulation.
ƒ Benefits and costs tend to focus on
bear the primary risks and rewards, ƒ It may have eminent domain
electrical-system attributes (e.g., lower
without other risks and rewards being and other site-access rights.
electricity bills; access to needed supply
passed to third parties. ƒ Note: If the authority is not a monopoly,
regions; reliability benefits). Typically,
the analysis includes only monetary • Note: It is sometimes difficult to obtain then it may face challenges in investment
benefits and costs associated with multi-state approvals for these lines, if a recovery, which may require that its risk
production and use of electricity. In regulator views the line as crossing an is underwritten by taxpayers.
some areas, benefits may include area that does not otherwise benefit Examples (not necessarily related to
economic development goals. from it. transmission for wind resources) include:
ƒ The facilities tend to be fully integrated Examples (not necessarily related to ƒ Tennessee Valley Authority
into the network (AC lines, including transmission for wind resources) include:
ƒ Bonneville Power Administration
both network facilities and/or “radial” ƒ Cross Sound Cable, connecting
lines providing “point-to-point” service). Connecticut and Long Island (DC ƒ Western Area Power Administration
ƒ Note: The August 2009 Seventh Circuit cable) ƒ New York Power Authority
Court decision requires evidentiary basis ƒ Neptune Cable, connecting Long Island
for demonstrating a nexus between those and New Jersey (DC cable)
who benefit and those who pay.
ƒ Northeast Utilities/NSTAR proposal to
Examples relating to transmission for wind build a DC transmission line between
resources include: Hydro-Quebec and New England
ƒ Texas’ “Competitive Renewable Energy
Zones” (“CREZ”)
ƒ Southwest Power Pool’s (“SPP”)
“Balanced Portfolio”
ƒ Southern California Edison’s (“SCE”)
Tehachapi lines


In the SCE Tehachapi project, the utility’s customers are underwriting the transmission investment to
connect the windy Tehachapi region with the distant customer load centers, and are doing so in advance
of wind projects actually being developed. Over time, as new wind projects enter service, they will be
assigned more of the costs of transmission, and SCE’s broader set of ratepayers will be assigned a smaller
share of transmission costs. The rationale for this approach is based, in part, on the state’s broad goal to
support low-carbon renewable energy resource development.
There are examples of merchant projects where the seller of renewable power is paying for or plans to
underwrite the cost of transmission investment (as in the case of the proposed line to be paid for by
Hydro-Quebec, and built by Northeast Utilities/NSTAR); and there are examples where the buyer
underwrites the line in order to get access to lower-cost supplies (as in the case of the Cross-Sound Cable,
with Long Island Power Authority paying for the line under contract to the builder, TransEnergie).

Socialized Transmission Cost-Recovery Models

Texas Competitive Renewable Energy Zones:
The panhandle and western portions of Texas are rich in potential wind power, but have historically
lacked the high-voltage transmission infrastructure needed to move electricity to the state’s densely
populated areas (e.g., Dallas, Fort Worth, Houston, etc.). In 2005, the Texas legislature passed Senate
Bill 20, in part to develop transmission infrastructure in advance of wind power development, thereby
breaking the chicken-and-egg stalemate. Senate Bill 20 directed the Public Utilities Commission of
Texas (“PUCT”) to identify and select the most productive wind zones in the state and devise a
transmission plan to move electricity generated from these zones – known as Competitive Renewable
Energy Zones (“CREZ”) – to customers. 56
The PUCT asked the state’s electric grid operator, the Electric Reliability Council of Texas (“ERCOT”)
to collect wind data and nominate the geographic boundaries of a number of CREZs based on
transmission cost calculations for each CREZ. In December 2006, ERCOT published a comprehensive
report which identified the geographic areas that the PUCT might consider in designating CREZs. 57 In
July 2007, after evaluating the potential for wind-generation in about 25 areas in the state, the PUCT
designated eight areas as CREZs, which were combined into five zones (see Figure 12). The PUCT then
tasked ERCOT with developing cost estimates for constructing high-voltage transmission from these
zones. ERCOT “evaluated 12 options to build transmission for additions of 1,000 MW to 4,600 MW of
wind energy. ERCOT found that the transmission addition would cost between $15 million and $1.5
billion, depending on the distance required. The transmission cost [would] average[s] $180/kW of wind
energy, or about 10% of the $1,800/kW capital cost [fn].” 58
In April 2008, ERCOT published a study identifying transmission plans for four scenarios, whose
projected transmission-related costs ranged from $2.95 billion to $6.38 billion (equivalent to $350 per kW
to $570 per kW), and whose projects could accommodate wind generation (installed capacity) amounts
ranging from 12,053 MW to 24,859 MW. 59 Three months later the PUCT approved the development of
Scenario 2 (see Figure 13), with an estimated cost of $4.93 billion and the ability to move approximately
18,500 MW of wind power from the CREZs to load centers. 60 In January 2009, the PUCT awarded the
development of CREZ transmission plan segments to 11 entities – five established transmission
providers, three new entrants, and three Texas cooperatives. The PUCT intends to stagger the


transmission filings over time, with the intent of having the first of these transmission projects online by
2011 or 2012. 61
Other than the costs of the direct generator Figure 12
interconnection facilities, the cost of Texas Competitive Renewable Energy Zones
transmission will be broadly socialized and
spread across all load serving entities in
ERCOT, allocated in proportion to the load
each serves. The estimated aggregate cost of
$4.3 billion is projected to amount to
approximately $4.00 per month per
residential customer once construction is
complete and costs are reflected in rates. 62
Senate Bill 20 and PUCT regulations have
dispensed with demonstration of need
requirements for transmission built to serve
CREZs (i.e., transmission proposed for
CREZ automatically meets ‘used and useful’
and prudence criteria) and guarantees cost
recovery. 63
Source: ERCOT, (available at
California’s Location Constrained
Resource Interconnection Tariff:
Figure 13
California’s grid operator (“CAISO”) has Texas Competitive Renewable Energy Zones with Transmission
utilized a socialized transmission cost-
recovery approach to support up-front
investment of transmission in advance of
new generation for areas that are “location-
constrained” but rich in potential resources.
Location-constrained resources include
wind resources and other “fuels” that cannot
be transported, and which must produce
power at the geographic site of the resource.
CAISO’s Location Constrained Resource
Interconnection (“LCRI”) tariff was
approved by FERC in December 2007 and
will be a part of the region-wide
transmission access charge levied upon all
ratepayers. Under the approved
mechanism, the cost of transmission Source: ERCOT, “Competitive Renewable Energy Zones (CREZ) Transmission
investment to connect location-constrained Optimization Study,” 2008, Figure 5: Scenario 2.
resources to the existing high-voltage
electric grid will initially be broadly socialized and recovered through this tariff. Over time, each
generator that interconnects is responsible for paying its pro-rata share of the going-forward costs of using


the line. As additional projects are developed and completed, they too pick up their pro rata shares of
transmission costs until the renewable resource area is fully developed. 64
Under the LCRI mechanism the cost and risk of the location-constrained area not being fully utilized by
generators is socialized across all CAISO ratepayers. CAISO is effectively allowing ratepayers to fund
transmission lines that do not meet reliability or economic tests in order to achieve a different policy goal:
encouraging the development of locationally constrained resources such as wind and solar power. 65
To qualify, transmission facilities must be included in CAISO’s transmission planning process and turned
over to CAISO’s operational control once in service. In addition, there must be a demonstrated interest
for at least 60 percent of the transmission capacity, of which at least 25 percent must be from firm
interconnection agreements. The remaining 35 percentage points of “demonstrated interest” can be
shown in one of several ways: through power purchase agreements for at least five years; being in the
CAISO interconnection queue and paying a cash deposit to CAISO equal to the projected sum of all
interconnection costs; and/or paying a cash deposit equal to five percent of a generator’s pro-rata share of
the capital costs associated
with the proposed Figure 14
66 SCE’s Tehachapi Renewable Transmission Project
transmission line.
California’s first LCRI project –
the SCE Tehachapi Renewable
Transmission Project – was
approved by the California
Public Utilities Commission in
March 2007. The project
consists of 220 kV and 500 kV
transmission lines, as well new
substations to connect the
Tehachapi Wind Resource Area
in southern Kern County to load
centers in Los Angeles County.
Construction is currently
underway on the first segments
of the project, which will have a
total capacity of 1,000 MW, and
are expected to come online in
phases by 2010. (See Figure
14.) SCE is currently in the
permitting process for additional
segments of the project,
representing an additional 3,000 Source: Southern California Edison website, (available at
MW of transmission capacity. 67 C2503560-4411-4844-98AD-E38FAF2D24D2/0/0811_TRTP13Map.pdf).


Southwest Power Pool’s Balanced Portfolio Approach:
The SPP, covering the largely rural areas of Oklahoma, Kansas, Nebraska and rural southwest areas, is
the oldest North American Reliability Organization still in operation. The area is rich in potential wind
resources but is constrained by the region’s current transmission grid which is composed primarily of
relatively low voltage lines.
As part of SPP’s long-term transmission planning process, a conceptual study was undertaken in 2007
that outlined a “Balanced Portfolio” approach for the development of extra-high-voltage transmission.
Subsequently, SPP developed tariff language that was approved (with modification) by FERC in October
2008. Under the Balanced Portfolio approach, SPP evaluates the benefits of a group of economic
transmission projects collectively rather than evaluating individual transmission projects on a project-by-
project basis. Also, the entire cost of the set of approved transmission projects is allocated to all zones in
SPP using a “postage-stamp” rate (i.e., all customers would benefit from EHV upgrades, so all should
pay). The aim of approach is to find a portfolio of system-wide economic transmission projects that are
both cost-effective (i.e., the net present value of benefits exceeds the net present value of costs) and
balanced (i.e., each zone in the SPP must have total benefits that are greater than total costs). 68 This
portfolio approach is intended to alleviate potential disputes that may arise from the construction of a
single transmission project whose costs are assigned to all zones, but that benefit one zone but not others;
if all individual zones do not receive net benefits, the group of proposed upgrades is revised until each
zone receives positive net benefits. 69
This approach was adopted with the blessing of SPP’s “Regional State Committee” (“RSC”) – the
organization composed of retail regulatory commissioners from public utility commissions in the SPP
states of Arkansas, Kansas, Louisiana, Missouri, New Mexico, Oklahoma, and Texas. Under SPP rules
approved by the FERC, the RSC (rather than the SPP Board) has direct decision-making authority on
specific topics; these rules give state regulators greater decision-making roles on regional transmission
matters than exists in other areas, under the terms of the rules proposed by SPP and accepted by FERC.
SPP’s RSC has:
primary responsibility for determining regional proposals and the transition process in
the following areas: (1) whether and to what extent participant funding would be used
for transmission enhancements; (2) whether license plate 70 or postage stamp rates will
be used for the regional access charge; (3) financial transmission right (FTR) allocation
where a locational price methodology is used; and (4) the transition mechanism to be
used to assure that existing firm customers receive FTRs equivalent to the customers’
existing firm rights. We stated that, if the RSC reaches a decision on the methodology
that should be used, SPP would file this methodology …[Also], the RSC should
determine the approach for resource adequacy across the entire region, and that, with
respect to transmission planning, the RSC should determine whether transmission
upgrades for remote resources will be included in the regional transmission planning
process, as well as the role of [transmission owners] in proposing transmission upgrades
in the regional planning process. 71


In April 2009, the SPP Figure 15
RSC and SPP Board of Approved Group of Transmission Projects Under SPP’s
Directors approved the first Balanced Portfolio Approach
group of high-voltage
transmission projects under
the Balanced Portfolio
approach. The $700 million
cost of the collective group
of projects will be funded
through FERC-approved
postage stamp rates under
which all ratepayers in the
SPP region bear the cost and
risk associated with the
projects. The 2009 balanced
portfolio includes five new
345 kV transmission lines, a
345 kV transformer, and a
new connection between two
existing 345 kV lines, shown

in Figure 15. SPP analyzed

Source: “Portfolio of New EHV Transmission Projects Approved: Benefits Will Be
over 50 different Balanced Across SPP Region,” SPP Press Release, April 29, 2009.
transmission projects in order
to identify this group of seven projects that met the requirements of the Balanced Portfolio approach (i.e.,
each SPP zone receives positive net benefits). 72

Merchant Transmission Cost-Recovery Models

The merchant transmission model is a contract-based cost-recovery model in which a specific market
participant (the “beneficiary”) enters into a contract with a transmission developer in order to fund new
investment. Unlike the socialized model, no cost recovery is made through a regulated tariff levied upon
some or all ratepayers. The transmission developer instead recovers its investment directly from the
beneficiary though the contract terms. In return, the beneficiary is given priority rights to use the new
transmission capacity. The beneficiary may be willing to enter into such a contract – and bear the
primary risks and rewards – for a variety of reasons including the ability to sell power into a higher-cost
market or the ability to acquire lower-cost power.
Two of the earliest examples of merchant transmission models are the Cross-Sound Cable (“CSC”)
Project and the Neptune transmission project. The CSC project is a 330-MW high-voltage direct-current
(“HVDC”) transmission line constructed in 2002 by TransEnergie and paid for under the terms of a
contract with the Long Island Power Authority (“LIPA”). This submarine cable connects Shoreham, New
York and New Haven, Connecticut and was built to provide LIPA with access to lower-cost sources of
electricity in New England. 73 The Neptune transmission project is very similar: it was constructed by
Neptune Regional Transmission System under a 2004 contract also with LIPA. The $600 million, 65-


mile long transmission line is an undersea HVDC system that connects Sayreville, New Jersey, to North
Hempstead, New York, and has a capacity of 660 MW. LIPA funded the project in order to have access
to lower-cost power in New Jersey (and other parts of the PJM region). Together, the Neptune and Cross
Sound cable systems provide LIPA with direct access to two independent power pools in the PJM and
New England markets and improved electric system reliability on Long Island. 74
More recently, Northeast Utilities Services Company (“NU”) and NSTAR filed an application with FERC
in December 2008 for approval of a 20-year bilateral transmission service agreement with HQ Energy
Services (“HQ”). Under the terms of the contract, NU and NSTAR would sell HQ 1,200 MW of firm
transmission capacity, at a cost-based rate, over a new HVDC transmission line that would interconnect
New England and HQ’s system in Canada. NU’s and NSTAR’s investment cost would not be recovered
through the New England wide tariff; instead, HQ would compensate NU and NSTAR for building,
operating, and maintaining the U.S. portion of the line through this contract-based rate. As part of the
transaction, HQ would sell and deliver 1,200 MW of hydro generation to purchasers in New England
under separate long term power purchase agreements. FERC approved the project, ruling that it was a
participant-funded project in which the risks and priorities assigned to HQ. 75

Economic Development Transmission Cost-Recovery Models

Under a classic economic development transmission model, transmission investment is driven by a public
authority whose mission may go beyond activities related solely to electric supply and delivery. For
example, the mission may include regional economic development, flood control, rural electrification.
The public authority is authorized to carry out investments to serve multiple missions with its customers
paying rates that recover the investment. Often investment in the generating capacity has been subsidized
at some point, and the delivery facilities’ costs are bundled with the power supply. As a public entity, it
typically has certain attributes that other entities lack, including: the ability to access low-cost capital
(e.g., where bond covenants require it to set rates to recover its investment costs); the ability to set its own
electric rates, which are not subject to state or federal rate regulation; and the power of eminent domain
and other site-access rights.
Examples of public authorities that have operated under this model include several federal agencies: the
Tennessee Valley Authority (“TVA”), the Bonneville Power Administration, the Western Area Power
Administration (“WAPA”), and the Southwestern and Southeastern Power Administrations. The roles,
responsibilities, authorities and geographic service areas of these various federal agencies differ
considering under the terms of their enabling legislation.
The TVA, for example, was established as a federal government corporation during the New Deal in
1933, for the purpose of rural electrification, industrial and other development, and flood control in the
multi-state area of the Tennessee Valley. “Today, TVA operates the nation’s largest public power system
and supplies power in most of Tennessee, northern Alabama, northeastern Mississippi, and southwestern
Kentucky and in portions of northern Georgia, western North Carolina, and southwestern Virginia to a
population of nearly nine million people. In 2008, the revenues from TVA’s power program were $10.4
billion and accounted for virtually all of TVA’s revenues….Initially, all TVA operations were funded by
federal appropriations. Direct appropriations for the TVA power program ended in 1959, and
appropriations for TVA’s stewardship, economic development, and multipurpose activities ended in
1999. Since 1999, TVA has funded all of its operations almost entirely from the sale of electricity and


power system financings.” 76 TVA has quite exclusive authority to undertake generation and transmission
investment and provide bundled wholesale power supply to scores of municipal and cooperative utilities
that serve nearly 9 million people in TVA’s service territory. 77
In many ways, TVA operates much like many large vertically-integrated electric utilities in the U.S.
However, unlike other utilities, TVA operates under federal laws that give it special service territory
protections and guarantees and financing capabilities that arise in large part from the TVA’s status as a
federal power corporation entity. By law, TVA’s Board of Directors has unilateral authority to set its
own rates, and must do so to assure that its rates cover its cost of providing electric service. TVA’s
statute and its revenues from the sales of electricity provide strong financial support for TVA’s bonds,
which are highly rated and enjoy certain tax exemptions. As a result of all of these circumstances, TVA
has a low cost of capital compared to many other electric companies in neighboring states with whom it
might potentially compete. Within its service territory, TVA supplies virtually all of its power to the
TVA Distributors within a service territory established and maintained by federal law. The TVA
Distributors in turn are required to purchase from TVA, and to resell to retail customers on terms and at
rates essentially the same as the rates charged the TVA Distributors by TVA.
By contrast to TVA, WAPA operates in a very different fashion. Although like TVA, WAPA markets
and transmits power supply to various customers within a geographic area, WAPA does not have
exclusive service territory protections or obligations. Its core business is to market power from federally-
owned hydroelectric power plants within a 15-state service territory. In FY 2007, WAPA sold power to
about 670 wholesale customers (municipal and rural cooperative utilities) who, in turn, provide retail
electric service to millions of consumers in these central and western States: Arizona, California,
Colorado, Iowa, Kansas, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, South
Dakota, Texas, Utah and Wyoming. 78 WAPA’s rates must recover all costs to provide service, including
recovery of the Federal investment in the power facilities (with interest) and certain costs assigned to
power for repayment, such as aid to irrigation.
WAPA’s transmission services also differ from those of TVA, and are more interspersed with facilities
owned by others. WAPA delivers power over an integrated 17,000 circuit-mile, high-voltage transmission
system that intersects with facilities owned by many other public and investor-owned transmission
systems. WAPA offers transmission services to others (including entities that are not power marketing
customers) under a FERC-approved Open Access Transmission Tariff. In recent years, WAPA has
planned, constructed and co-invested in transmission facilities in cooperative partnerships with investor-
owned utilities and transmission companies. For example, in partnership with Trans-Elect and Pacific Gas
& Electric, WAPA was a participant in the California “Path 15” project that opened up a chronic
transmission bottleneck within California. WAPA also has received significant funding under the
American Recovery and Reinvestment Act to support new transmission investment.
Several states have also established power authorities. Examples include two power authorities in New
York State: the New York Power Authority (“NYPA”), originally established to transmit and sell power
from various federal hydropower projects; and the Long Island Power Authority (“LIPA”), established as
part of a state-driven initiative during the late 1990s to close the Shoreham Nuclear Power Plant on Long
Island, transfer the other assets of the Long Island Lighting Company, and own the generation,
transmission and distribution facilities located on much of Long Island.


A recent example of a state authority being established to carry out various power delivery functions is
the Wyoming Infrastructure Authority (“WIA”). WIA is a “is a quasi-governmental instrumentality of
State of Wyoming. Created in 2004 by the State Legislature, the WIA’s mission is to diversify and
expand the state’s economy through improvements in Wyoming’s electric transmission infrastructure to
facilitate the consumption of Wyoming energy in the form of wind, natural gas, coal and nuclear, where
applicable. The Authority can participate in planning, financing, constructing, developing, acquiring,
maintaining and operating electric transmission facilities and their supporting infrastructure. Legislation
provided the WIA with bonding authority of $1 Billion and other powers to promote transmission
development in the State and throughout the region. It also provided the State Treasurer, with the
approval of the State Loan and Investment Board, the authority to invest in WIA bonds.” 79 As of this
writing, the WIA has not yet financed new infrastructure but is involved in planning and development
activities for many transmission projects in the state and in cooperation with neighboring states.

Transmission Models Used in Europe for Offshore Wind

Even with significant increases in wind development in the U.S. in recent years, the vast majority of
currently operational offshore wind capacity is located in Western Europe. The existence of relatively
shallow waters (30 meters or less) for large distances from shore in areas such as the North Sea has
allowed European countries to develop offshore wind farms using existing technology. Policies and
regulations vary from country to country, but in general European countries support offshore wind, and
are actively considering and moving toward inter-country policies, interconnections, and transmission
projects to continue to build their support for offshore wind.
Regional Planning – Offshore Grid: Individual countries like Germany, France, Spain and the UK are
each preparing comprehensive planning approaches for wind zones and interconnection. 80 In addition,
the European Transmission System Operators association has proposed dedicated regional multinational
offshore wind energy grid plans to coordinate the development and implementation of the necessary
infrastructure on a regional and European level, thus minimizing the total costs of offshore projects (e.g.
coordinated planning in the North Sea and the Baltic Sea). 81
The EU is currently performing the first large-scale European study to explore the benefits of a highly
interconnected harmonized European grid designed to allow for the interconnection of significant wind
power. The TradeWind Project will provide recommendations and guidelines for action at the EU and
national levels to move toward a single European grid and power market enabling more citizens to benefit
from wind power. So far, this effort has identified 42 onshore interconnectors and a corresponding time
schedule for upgrading that would benefit the power system and help integrate wind power. Investments
for these projects would largely be made by individual Member States. 82
The European Wind Energy Association (“EWEA”) is also looking at what would be needed (and
possible) to develop a large-scale offshore grid by 2030. (See Figure 16.) Roughly 2 GW of offshore
wind is currently online in Europe; EWEA predicts about 40 GW by 2020, producing 148 TWh (about 4
percent of total demand in Europe). By 2030 EWEA predicts 150 GW, producing about 563 TWh (about
13-17 percent of total European demand). 83


As a major step in the right Figure 16
direction, on December 7, 2009, EWEA Offshore Grid Vision: 2030
Denmark, France, Germany, Ireland,
Luxembourg, the Netherlands,
Sweden and the United Kingdom all
signed the North Seas Countries
Offshore Grid Initiative declaration,
which promises cooperation in the
examination and planning for an
offshore wind energy “Supergrid” in
the North and North West Seas. 84
Some specific objectives have been
laid out in the organizational plans:
To identify national
ambitions for offshore
renewable energy sources, = Currently existing = Under study (EWEA recommendation)
shortcomings in present and = Currently planned = EWEA recommended grids by 2020
= Under study = EWEA recommended grids by 2030
future cross border grid Source: Oceans of Opportunity: Harnessing Europe’s Largest Domestic Energy
infrastructure Resource, European Wind Energy Association, September 2009.
developments and national
policies on relevant issues which have impacts on the sustainable development of an
offshore North Seas grid (incl. maritime physical planning for offshore wind, site
selection, grid configurations),
To facilitate a coordinated electricity infrastructure development, both offshore and the
necessary onshore connections, in view of the large amounts of wind power planned,
To achieve a compatible political and regulatory basis for long term offshore
infrastructure developments within the North Seas region,
To foster a joint commitment of all relevant stakeholders to tackle all technical, market,
regulatory and policy barriers, and,
To organize a workshop with relevant stakeholders, at the beginning of 2010 to prepare a
strategic working plan aiming at coordinating the offshore wind and infrastructure
developments in the North Seas and listing the potential actions, studies and issues to be
tackled by the North Seas Countries’ Offshore Grid Initiative. 85

Transmission Cost Allocation: Models for transmission cost allocation for offshore renewable projects
vary across different European countries. The three basic frameworks for allocating costs have been
characterized as “super-shallow,” “shallow,” and “deep,” referring to the level of monetary contribution


required of the wind-farm developer for transmission costs to interconnect with the on-shore grid. (See
Figure 17.) 86
ƒ Super-Shallow – The renewable project developer pays only for the cost of interconnecting the plant
to the grid, and not for grid upgrades/reinforcements. Any necessary grid upgrades/ reinforcements
are paid for by the grid operator, and typically passed onto consumers (i.e., socialized) through tariffs.
Examples include Germany (for offshore wind), Belgium, Ireland, Italy and Denmark.
ƒ Shallow – Hybrid approach whereby the renewable developer pays a portion of any necessary grid
upgrades/reinforcements, with the remainder socialized. Examples include Finland, Austria and the
Czech Republic. Figure 17
ƒ Deep – The renewable developer Transmission Cost Allocation Methods
pays for all costs associated with
connecting its project to the high-
voltage network, including all Existing Grid
network upgrades/reinforcements. Generator
This approach is viewed as
potentially causing a first-mover
disadvantage, since future
developers could benefit from new
infrastructure at no cost. Examples
include Great Britain, Netherlands,
Slovenia, Hungary, and Germany
(for onshore renewables).
Source: Swider et al., “Conditions and Costs for Renewables Electricity Grid
Connection: Examples in Europe,” Renewable Energy, 33 (2008) 1832-1942.

Country-Specific Transmission Model Details: Figure 18

German TSO Territories
Germany has different transmission cost allocation models for different
types or renewable energy, with offshore wind currently getting
preferential treatment. Transmission costs for connection of offshore wind
farms to the onshore grid are considered super-shallow, while costs for
connecting other energy sources (including other renewable energy
sources) are generally deep. 87 Furthermore, Germany’s Renewable Energy
Sources Act of 2004 dictates that renewable energy has priority in grid
connection and also power dispatch. 88 Conventional power sources must
always reduce generation in case of congestion in order to accommodate
generation from renewable energy sources as long as existing transmission
capacity is not exceeded. All energy generated by renewable generators
must be purchased the Transmission System Operators (“TSO”). 89
Source: Facts about the German
Electric Grid, Vattenfall, June 2009.


In general, the Figure 19
transmission-related German Offshore Wind Development
costs of delivering an
increasing amount of
renewable energy in
Germany are recovered
as part of the use-of-
system charge for each
TSO. 90 However, the
costs associated with
connecting offshore
wind to the onshore
grid are initially absorbed by the specific local TSO, but
eventually distributed across all four of the German TSO’s
(depicted in Figure 18) through a special mechanism. 91

In 2006 Germany passed the Infrastructure Planning

Acceleration Act, which seeks economies of scale in
construction and planning for offshore wind by making
TSOs responsible for planning and financing off-shore wind
farm grid connection (as noted above), but also for bundling
possible future wind farm connections during planning to Source: Deutsche Energie-Agentur (DENA)
(German Energy Agency), (available at:
avoid a one-wind farm-one-cable type system. 92 As yet
another step toward promotion of offshore wind resources,
TSOs are also expected to preemptively invest in any infrastructure necessary (e.g., new transmission,
reinforcements, upgrades, etc.) for connecting offshore wind farms to the established onshore grid. 93
(Figure 19 depicts the current state of German offshore wind development).

Norway: Figure 20
Norway – Geographic Layout
In Norway (see Figures 20 and 21), Statnett (the state-owned
transmission grid owner/operator) is responsible for most grid
expansion and maintenance. Funding for ongoing use of the
transmission system is paid for through the point-of-connection
tariff, which varies by location. Funding for grid expansion,
reinforcement and upgrade, is paid for through the general
transmission tariff and/or a “construction contribution.” 94

The general tariff includes a connection charge and a demand

charge. The construction contribution is a one-time payment
charged to those benefitting from the grid investment, and can be
levied to cover the costs of connecting new customers, or for the
95 offshore-wind-z02.jpg.
reinforcement of the network for existing customers. Statnett has
the discretion to allocate the construction contribution between customers connected to the grid at the


time the installation is completed, and future customers Figure 21
connecting up to 10 years after completion of the installation. Norwegian Wind Energy Sites
Moreover, Statnett may choose to incrementally allocate the
investment contribution when new customers connect, or instead it
may request that contributions are made in advance subsequently
adjusting proportionally as more connections are made. 96 (This
system is somewhat similar to that which Southern California
Edison used for their Tehachapi project.)

Overall Norway prefers to increase utilization of existing lines

rather than building new lines, and has only built one large power
line in the last 10 years. 97


In Denmark (see Figure 22), (the state-owned

transmission grid owner/operator) is responsible for investments
in electric and gas networks. Its stated position is that transmission
infrastructure must support, and therefore be expanded to
accommodate, the increasing use of renewable energy coming
online. In addition, off-shore wind is a priority and a major Source:
consideration related to grid expansion in Denmark. 98

The cost of interconnection to the transmission grid in Denmark is Figure 22

typically super-shallow. The TSO (and/or distribution company) Denmark – Wind Resources
funds any costs beyond simply interconnecting the offshore wind Wind Energy Sites
facility to the grid, and these other transmission costs are spread
over all transmission system users. These transmission costs are
recovered through a point-of-connection tariff, which has three
components: a grid charge, a system charge, and a Public Service
Obligation (“PSO”) component. The grid and system charges are
associated with the major transmission grid, reserve capacity and
other related costs. The PSO is levied on all users in a uniform
fashion, using postage stamp rates (i.e., same charge regardless of
location) that are directly related to the costs of renewable energy.
The PSO is intended to allow renewable producers to be
guaranteed a fixed price for supply. In addition, most renewable
energy sources are not required to pay transmission access
charges, and those that do are eligible for an exemption for up to
10 years. 99

Somewhat similar to the Texas CREZ model, Denmark utilizes Source:
strategic zones or geographic areas for offshore wind map.gif.
development. Municipalities have been required to allocate such


zones since 1994, and siting and permitting in these areas are essentially fast tracked. 100

United Kingdom

The UK has a somewhat novel approach to facilitating the creation Source: Wind Resources Atlas for Denmark
of offshore transmission: Private entities will build, own and operate offshore transmission facilities (see
Figure 23). Offshore Transmission Owners (“OFTO”) will be chosen on the basis of a competitive
bidding process. In its capacity as National Electricity Transmission System Operator (“NETSO”),
National Grid Electricity Transmission PLC
(“National Grid”) will have primary Figure 23
authority over the offshore grid, but is UK – Proposed Wind Development
prohibited from owning, or seeking to own,
offshore transmission assets. That said, other
National Grid affiliates are permitted to bid
for and own offshore transmission assets.
OFTOs receive a 20-year revenue stream
from NETSO for each project, with 10
percent being subject to performance
requirements. Ultimately, NETSO will
recover its costs through basic transmission
charges. 101

In the UK, transmission operators typically

recover costs through a combination of
charges: connection charges (typically
shallow, but can vary) levied on the
generator; and use-of-system charges
(locational) levied on generators, suppliers
and customers. Regulators are generally
willing to allow regulated firms to earn
higher returns than their cost of capital when
returns are achieved from cost savings
beyond a benchmark, knowing that the next
‘ratchet’ will convey these benefits to
consumers. 102




In recent years, a number of studies have analyzed the cost to build out a transmission system in support
of developing domestic wind resources. Many of these have been conducted in the context of state-level
transmission planning for “renewable energy zones” (as in Texas and Colorado); others have been more
national in scope. Most recently, the New England Governors requested a study to be performed by the
region’s grid operator, ISO-NE, to explore the cost implications for the onshore regional transmission
grid of adding different levels of wind generating capacity. The various scenarios examined included
wind development on land within New England, in the offshore waters of New England’s coastal states
and in adjacent federal waters, and from outside the region (e.g., Canada, New York, and/or the

Studies of Transmission Costs for Offshore Wind

Without even considering transmission costs, building offshore wind facilities will in general be much
more costly than building wind facilities on land. Exact differences vary by location but studies indicate
that the cost of building offshore wind generation, excluding transmission, will typically be roughly
double the cost of building terrestrial wind generation. However, this cost difference is largely
counteracted by the generally higher wind speeds and capacity factor offshore: “The wind offshore tends
to flow at higher speeds, thus allowing turbines to produce more electricity… The potential energy
produced from the wind is directly proportional to the cube of the wind speed, meaning a few miles an
hour increase in wind speed would produce a significantly larger amount of electricity. For instance, a
turbine at a site with an average wind speed of 16 mph would produce 50% more electricity than at a site
with the exact same turbine with average wind speeds of 14 mph. The power of the wind is significantly
less on land.” 103
The costs associated with transmission for offshore wind differ from those for onshore wind, and are
typically substantial. A number of existing studies have provided information specifically about the cost
of submarine cables for power projects. Some of these studies relate to hypothetical offshore wind
projects (e.g., an NREL conceptual study of offshore wind farms). Some relate to specific proposed
offshore wind projects (e.g., Cape Wind). Still others relate to submarine transmission investment that
has actually occurred in connection with non-wind power projects. These cost estimates are summarized
in Table 3, below. In order to make an apples-to-apples comparison across the studies, the estimates of
transmission costs have been converted to a cost per mile, and updated to reflect the cost in 2009 U.S.
dollars, using the Handy-Whitman Index for “total transmission plant.”
There are two technology options available for the transmission system associated with offshore wind
power: high-voltage alternating current (“HVAC”) and high-voltage direct current (“HVDC”). According
to a March 2007 publication issued by NREL, HVAC is generally thought to be the most economical
option for distances shorter than 50 km. Between 50 and 80 km offshore, HVAC and HVDC are
expected to be similar in cost. For lines longer than 80 km, HVDC systems will likely be least cost,


mainly because the effective capacity of a given HVAC cable drops off with distance due to the
capacitive and inductive characteristics of the cable and their associated line losses. 104 HVDC
transmission avoids these line losses entirely, so it is the preferred technology for longer distances.
Moreover, to maintain an apples-to-apples comparison of transmission costs, the cost of an HVDC system
must include the cost of converter stations necessary to convert from AC to DC at the wind farm, and then
back from DC to AC at the point of connection to the onshore grid. HVAC transmission system does not
require conversion because their AC power is already compatible with the onshore grid.
With these technology cost and performance differentials for wind projects in mind, the comparison of
terrestrial versus offshore wind must also take into account the relative cost of transmission. Distance and
technology choices matter, of course. Given the abstract nature of proposals to date, 105 it is hard to draw
concrete conclusions about all-in costs (including transmission) to purchase renewable energy delivered
by terrestrial wind resources that are located quite a long way away from customer load centers in
Massachusetts (e.g., in Quebec, or in the wind-rich areas of the Upper Midwest states), as compared to
purchasing power from more local offshore wind projects close to Massachusetts customers. However,
given that potential Upper Midwest wind resources are located significantly further away from New
England electricity consumers than are potential Massachusetts offshore resources, common sense
suggests that there are comparative economic advantages for development of local wind resources,
especially when in-state and in-region economic development benefits are taken into consideration.


Table 3
Summary of Submarine Transmission Cost Estimates
Source Characteristics of the Project Year of the Transmission Updated 2009
Studied Study/Estimate Cost Estimate as Transmission
of Study Date Cost Estimates*
Cape Wind Project Four 115 kV transmission lines, 2003 (date of direct $3.7 million/mile $5.4 million/mile
transmission plan range of scenarios from 11-27.5 testimony)
miles, 468 MW installed capacity
Cape Wind Project HVAC option: 115 kV AC 2003 $3.7 million/mile $5.4 million/mile
transmission studies submarine cable, 420 MW
(ESS Study, produced installed capacity, 35 miles
for Cape Wind
Associates, LLC) HVDC option, +/- 150 kV DC 2003 $4.7 million/mile $6.8 million/mile
submarine cable, 420 MW
installed capacity, 35 miles,
includes two converter stations
NREL – conceptual 150 kV transmission line, ≤30 2007 $1.3 million/mile $1.4 million/mile
study of offshore wind miles, for a hypothetical 500-MW
farms wind farm

1st Int’l Workshop on HVDC Transmission facilities 2000 $5.5 million/mile $8.9 million/mile
Feasibility of HVDC and converter stations for 400
Transmission Networks MW of wind, 60 miles, (~1/3 of
for Offshore Windfarms the total cost of the wind farm)
Renewable Energy Non-wind project, 3 miles, 4 2002 RERL study $3.8 million/mile $6.1 million/mile
Research Lab single-core cables for a 138 kV of 1999 project in
(“RERL”), UMASS, AC line with 130-MW capacity Juneau, Alaska
Amherst study of
transmission options for
U.S. offshore wind cost Cross-Sound HVDC Cable non- 2002 RERL study $5.1 million/mile $7.5 million/mile
of sub-marine wind project, 24 miles, 330-MW of 2002 project
transmission cable for capacity, includes two converter from Long Island,
both wind and non-wind stations NY to CT

* Transmission costs were converted where necessary into dollars per mile, and were then converted to July 2009 U.S. dollars
using the change in the Handy Whitman Index for “total transmission plant.”
• Direct Testimony dated February 2003 from “Final Decision in the Matter of the Petition of Cape Wind for Approval to
Construct Two 115 kV Electric Transmission Lines,” Massachusetts Energy Facilities Siting Board, May 11, 2005, footnotes 33
and 35.
• J. Green, A. Bowen, L.J. Fingersh, and Y. Wan, “Electrical Collection and Transmission Systems for Offshore Wind Power,”
National Renewable Energy Laboratory, March 2007.
• Jennie Weatherill, et al., Review, First International Workshop on Feasibility of HVDC Transmission Networks for Offshore
Wind Farms, 2000. Available at:
• Transmission Options for Offshore Wind Farms in the United States; Renewable Energy Research Lab, University of
Massachusetts, American Wind Energy Association, 2002.
• Appendix 3-C: Transmission Issues for Offshore Wind Farms, Cape Wind, 2003. (This document is an edited revision of a
paper entitled “Limitations of Long Transmission Cables for Offshore Wind Farms,” ESS, Inc. 2003.) 


Offshore Wind Transmission Study Details
The transmission studies summarized in Table 2 are described in more detail below. As reflected in Table
2, all estimates of transmission costs detailed below have been converted to a cost per mile, and updated
to reflect the cost in 2009 U.S. dollars, using the Handy-Whitman Index for “total transmission plant.”

Cape Wind Project transmission plan

In 2003, the Cape Wind Project submitted a transmission plan to the Massachusetts Energy Facilities
Siting Board (“Siting Board”) as part of the offshore wind siting/permitting process. Cape Wind
Associates, LLC submitted several potential transmission options of varying cost for their project, both
AC and DC options, with the AC cables being 115 kV and the DC cables being 150 kV. Ultimately, the
Siting Board selected the Barnstable Interconnect transmission option, citing the fact that: “…the
Barnstable Interconnect would be preferable to both the Harwich Alternative and the New Bedford
Alternative with respect to providing reliable energy supply for the Commonwealth, with a minimum
impact on the environment at the lowest possible cost.” The cost for the Barnstable Interconnect was
estimated at approximately $5.4 million/mile.

Cape Wind Project transmission studies (ESS Study, produced for Cape Wind Associates, LLC)
In 2003, ESS, Inc. performed a transmission study for Cape Wind Associates, LLC as part of the
transmission planning process for the Cape Wind Project. This study broke down the costs of both AC
and DC system options utilizing the Barnstable Interconnect route. The AC option includes four three-
core 115-kV cables over a distance of 35 miles, at an installed cost of $5.4 million/mile, or $12,825
dollars/MW/mile. The DC option includes four single-core 630 mm2 150-kV cables over a distance of 35
miles, as well as the two necessary converter stations, at an installed cost of approximately $6.8
million/mile, or $16,180 dollars/MW/mile.

1st Int’l Workshop on Feasibility of HVDC Transmission Networks for Offshore Windfarms (Sweden):
This offshore wind transmission cost estimate comes from a review of documents presented at the “First
International Workshop on Feasibility of HVDC Transmission Networks for Offshore Wind Farms,” held
in Stockholm, Sweden in March of 2000. The Workshop included sessions on a number of topics,
including: “HVDC Transmission Systems – New Converter and Cable Technologies,” “Advances in
Offshore Wind Energy Technology,” “Systems aspects and Grid Interconnection,” and “Business Models
for the Operation of Offshore HVDC Transmission Networks.” During this Workshop, participants
discussed the difficulty of estimating prices for equipment and installation costs (including cable laying),
and related transmission costs. These costs were for a hypothetical 400-MW offshore wind farm, with 60
miles of transmission. The cost amounted to approximately $6.2 million/mile for the converter stations
and $2.7 million/mile for the cables, or cumulatively $22,227 dollars/MW/mile. (Note that while the cost
of cable varies with distance and capacity, the cost of the converter station varies by capacity).

NREL – conceptual study of offshore wind farms

In 2007, NREL published a study on “Electrical Collection and Transmission Systems for Offshore Wind
Power,” which was presented at the Offshore Technology Conference in Houston, Texas, in April 2007.
This study focused on development of a simple model for cost and performance of electrical systems for
offshore wind power. The model’s approach to estimating costs is flexible and designed in a way that


allows for various parameters (e.g., number of turbines, turbine size, turbine array configuration, and
distance from shore) to vary in different assessments. Among other examples, the study includes two
representative but hypothetical estimates of the cost of submarine transmission cables. In particular, these
hypothetical cables are AC with a conductor size of 630 mm2, contain a single layer of steel armor and are
XLPE insulated. The average of the two cost estimates provided was approximately $1.4 million/mile.

Renewable Energy Research Lab (“RERL”), UMASS, Amherst study of transmission options for U.S.
offshore wind cost of sub-marine transmission cable for both wind and non-wind projects
In 2002, the Renewable Energy Research Lab at the University of Massachusetts, Amherst, presented a
study for the American Wind Energy Association (“AWEA”) entitled “Transmission Options for
Offshore Wind Farms in the United States.” This study addresses some of the prominent forward-looking
issues related to transmission for offshore wind, including choosing between different voltages, choosing
between AC and DC systems, the lack of domestically manufactured medium and high-voltage insulated
submarine cables, and the lack of equipment for and experience with large-scale submarine cable laying.
The study also presented summarized cost information and other project aspects for multiple submarine
transmission cables projects, with some examples from wind projects and some from non-wind projects.
One of the non-wind transmission examples is that of a project in Juneau, Alaska in 1999. The project
consisted of four single-core AC cables with a capacity of 130 MW and voltage of 138 kV. The cost for
this cable was approximately $6.1 million/mile, or $46,944 dollars/MW/mile.
Another non-wind transmission project example is that of a project from 2002 across Long Island Sound,
linking Long Island, New York to Connecticut. This 24 mile long DC cable project had a capacity of 330
MW (+16 MW loss), and voltage of +/-150 kV. The cost for this project was approximately $7.5
million/mile, or $23,763 dollars/MW/mile, and includes the cost of the converter stations.
This study also contains information about lower capacity projects that may be less relevant in the context
of large-scale offshore wind, but worth mentioning given the scarcity of reliable transmission cost
information. One non-wind project from 1996 in Nantucket, MA, consisted of one 3-core 46 kV AC
cable, 26 miles long, with a 35 MW capacity, and had cost of $1.9 million/mile or $54,896
dollars/MW/mile. One Danish wind-related transmission project from 2001 called Middelgrunden
consisted of two parallel 30kV AC cables, 2 miles long, with a 40 MW capacity, and had a cost of $3.6
million/mile or $90,594 dollars/MW/mile.

ISO-New England’s “Governors’ Economic Blueprint” Study

Certain in-region transmission implications of local offshore versus long-distance renewable projects
have recently been examined in ISO-NE’s study for the New England Governors. This economic study
was designed to identify “significant sources of renewable energy available to New England, the most
effective means to integrate them into our power grid, and the estimated costs.” 106 During the 2nd and 3rd
quarters of 2009, ISO-NE conducted a “scenario analysis” to examine different amounts and locations for
development of renewable power, and focused primarily on the implications for the onshore delivery
system of wind resource development in and outside of New England.


The study is indicative of the type of analytic work being done in this region to sharpen understanding of
the implications for the region’s onshore high-voltage transmission infrastructure of integrating large
amounts of offshore wind, and it shows that adding large amounts of wind is technically feasible.
However, the study only examined the costs of transmission in New England’s high-voltage transmission
system, and did not include transmission facilities needed either to bring external wind resources to New
England’s borders (e.g., across the Midwest and New York), or to interconnect offshore wind projects to
the onshore system within New England, or even to interconnect terrestrial wind farms in, say, Maine,
with the high-voltage system in New England. Therefore, while this study is an important step, it
provides only partial information about the transmission-related costs associated with wind development,
and further work is necessary.
ISO-NE conceptually identified wind projects and transmission requirements as of the year 2030 for
multiple scenarios, each representing a different combination of wind resource availability onshore and
offshore. Most scenarios were examined for wind projects located inside of New England (e.g., with up to
12,000 MW of wind in New England, including 7,500 MW onshore and 4,500 MW offshore with the
amounts evenly distributed between
Figure 24
Maine, Massachusetts and Rhode Island)
New England Wind Zones
but a few scenarios with wind located
from outside of New England (e.g., from
Quebec, and New Brunswick) were also
examined. The New England wind zones
relative to load centers are shown in
Figure 24.
The results of the study are shown in
Table 4, which presents the high-level
features of the key scenarios, along with
the on-shore transmission enhancements
that would be needed to accommodate the
wind resources in each scenario. The
Table also presents the estimated range of
in-region, onshore transmission costs
associated with each scenario.
This table provides neither sufficient
detail nor cost elements for drawing
conclusions about the economics of
delivered wind power into New England.
On the transmission side, it includes only
those costs related to onshore upgrades of
the New England transmission system,
and includes no costs associated of
connecting a wind resource to the onshore Source: New England 2030 Power System Study: Preliminary Maps and
New England grid. For some scenarios Cost Estimates for Potential Transmission; ISO-NE Planning Advisory
these costs would be quite high. Committee; August 14, 2009.


Furthermore, given the different combinations of transmission technology (i.e., AC versus DC lines) and
voltage levels (e.g., 345 kV, 500 kV, 765 kV), along with the amount of wind-generating capacity capable
of being carried by the system (ranging from 2,000 MW to 10,000 MW), one cannot draw clear cost
comparisons across the scenarios. Finally – and again, by design – none of these scenarios includes the
costs of constructing and/or operating the wind farms themselves.
Table 4
Preliminary Transmission Cost Estimates –
ISO-NE Scenario Analysis of New England Transmission Expansion for Wind
Costs Associated with Onshore Transmission Enhancements within New England*
Circuit Miles
of New Preliminary order-of-magnitude Mid-range
On-Shore cost estimate range by voltage cost
Description of Scenario Transmission class (2009 dollars) estimate
1 2,000 MW On and Offshore Wind 1,785 345 kV/HVDC: $4.7B to $7.9B $6.4B
2 2,000 MW Offshore Wind 1,015 345 kV/HVDC: $3.6B to $6.0B $4.8B
345 kV: $8.0B to $13.2B $10.7B
3 4 000 MW On and Offshore Wind 3 615
500 kV: $10.8B to $17.9B $14.3B
4 4,000 MW Offshore Wind 1,430 345 kV/HVDC: $4.7B to $7.6B $6.1B
5,500 MW (1,400 MW inland, near
5 1,430 345 kV/HVDC: $4.7B to $7.6B $6.1B
coast, 4,000 MW offshore)
500 kV: $13.4B to $22.4B $17.9B
6 8,000 MW On and Offshore Wind 4,320
765 kV: $17.3B to $28.9B $23.0B
500 kV: $14.5B to $24.2B $19.3B
7 12,000 MW On and Offshore Wind 4,320
765 kV: $18.9B to $31.5B $25.2B
1,500 MW New Brunswick
8 400 +/-450 kV HVDC: $1.5B to $2.5B $2.0B
+/-450 kV HVDC: $11B to $19B $16B
9 1,500 MW Québec Interconnection 280
+/ 450 kV HVDC: $1.1B to $1.9B $1.6B
10,000 MW New York 500 kV: $4.7B to $7.7B $6.3B
10 1,020
Interconnection 765 kV: $6.8B to $11.2B $8.9B
New England & Eastern Canada
$4.7B to $7.6B for NE, plus $2.6 to
11 Wind (5,500 MW NE, 3,000 MW 2,110 N/A
$4.4 for CA. Total ~$7B to $12B
New Brunswick & Quebec)
New England & Eastern Canada
$14.5B to $31.5B for NE, plus $2.6
12 Wind (12,000 MW NE, 3,000 MW 5,000 N/A
to $4.4 for CA. Total ~$17B to $36B
New Brunswick & Quebec)
Source: ISO-NE, Draft New England 2030 Power System Study – 2009 Economic Study: Scenario Analysis of Renewable
Resource Development, September 8, 2009.

* Unless otherwise specified, cost estimates only include on-shore transmission facilities within New England. Specifically,
the costs estimates do not include: (a) any costs to interconnect wind projects to New England’s high-voltage system, whether
the facilities are located on land in New England or in New England’s offshore waters; (b) costs to add transmission facilities
in Québec and New Brunswick to bring renewable power from those regions to the border of New England; or (c) the cost of
building transmission from the Midwest to the NY-NE border. The dollar estimates shown above only includes the cost of
integrating energy from the NY-NE border to load centers in New England.


The report suggests preliminary thinking of the ISO-NE with regard to possible technical configurations
for transmission to connect windy areas offshore of Southeastern Massachusetts to the grid. As shown in
Figure 25, offshore wind farms south of Martha’s Vineyard could be interconnected via 115 kV lines
through various new or existing substations (e.g., Falmouth, Barnstable, Martha’s Vineyard); projects
south of the Elizabeth Islands could connect through the Falmouth substation (with nearby offshore wind
farms to the West of that location possibly connecting through the Brayton Point substation in Somerset).
The analysis suggests that interconnecting 4,500 MW of offshore wind is possible in terms of capability
of the onshore grid, but would still require some expansion of the onshore system to deliver power to
customers in the region.
Figure 25
Potential Transmission System Expansion to Interconnect Wind Projects Deemed Feasible
4,000 MW Off-Shore Wind Scenario

Source: New England 2030 Power System Study: Preliminary Maps and Cost Estimates for Potential Transmission; ISO-NE
Planning Advisory Committee; August 14, 2009.

Overall, the Governors’ Economic Blueprint study reached a number of conclusions, including: (a) the
transmission scenarios that were developed are generally robust, workable solutions with cost estimates
based on actual project experience; (b) more detailed transmission studies, however, will be required if
the region pursues specific projects, since all of these scenarios are conceptual; and (c) new voltage
classes will be needed for higher wind penetration scenarios (345 kV is the backbone of the existing



Given the rich resources located off the coast of Massachusetts, the Commonwealth faces a number of
decisions about whether, and potentially how and when, to take proactive steps to help provide
transmission access to windy offshore areas. Facilitating access to transmission would assist potential
developers of offshore wind farms by cracking the chicken-and-egg problem, and providing a way to
connect projects to the onshore grid and thereby deliver renewable energy to customers in Massachusetts
and neighboring regions.
The final section of this report summarizes a core set of strategic policy options and approaches that
Massachusetts state officials may wish to consider as part of their overall strategy to support offshore
wind for economic development, environmental, and other electricity policy goals. These options have
been informed by the types of technical, policy, structural, and environmental issues described previously.
Some of these options may require new enabling legislation; others may require executive-branch
authority alone. All of the options would depend upon innovative methods for investment recovery, as
well as require more detailed analysis.

Core Attributes of and Assessment Criteria for Strategic Transmission Models

The strategic transmission options discussed here involve two key dimensions: the basic character of the
physical layout of the offshore transmission system, and the basic ownership/investment structure for the
offshore transmission system. It is assumed here that the transmission system connecting one or more
offshore wind farms to the onshore grid is owned by an entity other than the developer of the wind farm.
(This is not an essential feature of offshore transmission for offshore wind, but instances where common
ownership or at least common planning for both facilities makes the chicken-and-egg problem far less
difficult. It is for this reason that the focus here is on other situations.)
Each of the dimensions (“core attributes”) discussed here introduces different implications and choices
for policy-makers – such as who pays for and benefits from supporting the development of transmission
facilities for offshore wind, and in turn suggests different degrees of difficulty in adopting a particular
Core Attributes: From a strategic point of view, two initial questions are: (1) what is the vision for
offshore wind development in Massachusetts, and (2) how might different physical configurations and
ownership structures of an offshore power delivery system enable this vision?
1. Physical Layout of the Offshore Transmission System: The first dimension relates to the character
of the physical configuration of the transmission facilities for offshore wind:

ƒ “Radial System” – One option for the submarine transmission system design is a radial
system, which in essence is like an extension cord (a “radial” line), providing transmission


service between two points (the wind farm and the connection to the grid). Figures 26a
through 26d depict various conceptual designs for radial-line systems supporting transmission
from one or more wind farm projects. 107 With regard to electrical carrying capacity, it is
necessary to consider whether the main trunk line would have: (1) just enough capacity for
the single wind farm it was designed to service, or (2) enough capacity to support more than
one wind farm (potentially starting with one and adding more over time) without requiring
upgrades to the transmission capacity of the submarine cable itself. These options have
different implications for solving the chicken-and-egg problem, at least in terms of having a
mechanism to support the investment costs of the capacity not needed by the initial wind
farm, since those costs may make that first project uneconomic if it were required to carry
transmission investment costs intended to service one or more future wind project(s).

ƒ “Network Model” – Another option for the submarine transmission system is a design more
like a backbone (know as a “network” system), capable of connecting to multiple wind farms.
Figures 27a and 27b illustrates two possible configurations, where the offshore transmission
system is connected to the onshore grid in more than one location, making it a loop. 108 In this
type of scenario, it would be necessary to determine whether the loop would connect to shore
only within the boundaries of Massachusetts, or whether it would expand over time (or from
the beginning) to connect wind farms with electricity customers in multiple regions (e.g.,
customers in Maine, Rhode Island, Long Island, New Jersey). Connecting into more than one
state would increase the need for Massachusetts to work proactively and constructively with
counterparts in the neighboring state(s) to develop parallel policy mechanisms to support the
development of the interstate offshore transmission system. The state would also have to
consider whether the initial segments of the loop would be designed for a future large-scale
build-out of wind facilities over time, and also how much carrying capacity the main trunk
line would have. Similar to the radial system, the main trunk line could have: (1) just enough
capacity for the single wind farm it was designed to service, or (2) enough capacity to support
more than one wind farm (potentially starting with one and adding more over time). As with
the radial system approach, the greater the capacity of the initial line beyond the needs of the
first wind farm built, the more support for transmission costs will need to be provided beyond
what the first wind farm can bear, and the more troublesome the chicken-and-egg problem.


Conceptual Designs for Submarine Transmission Facilities for Offshore Wind:

Figure 26a Figure 26b

Radial Configuration for Radial Configuration for
Single Wind Farm Multiple Wind Farms

Figure 26c Figure 26d

Radial Configuration for Staged Radial Configuration for
Groups of Wind Farms Multiple Wind Farms

Stage 1
Stage 2
Stage 3


Both of these physical configuration options require Figure 27a
further analysis with regard to certain of the technical Network Configuration for Multiple
details and a relatively precise estimate of costs. Wind Farms

2. Ownership/Investment Approach of the Offshore

Transmission System: In addition to the physical
configuration, a second core dimension relates to the
structure of ownership and investment of the offshore
transmission system. This affects the institutional
framework and business model underlying the delivery
system. Three primary options are detailed below (but
given that they can represent different combinations of
ownership and investment considerations some of these
options are variants of similar ideas).
ƒ Investor-Owned Utility Approach – One option
is for the offshore transmission system to be
developed by a traditional transmission
company, under a traditional cost-based
investment structure, with the transmission rate Figure 27b
established by regulators. Network Configuration for Multiple
Wind Farms
- Presumably, this case could apply where the utility
were expected to provide transmission service as
part of its obligations in a service territory that
extends into state waters (or even adjacent federal
waters), assuming that such authority and
obligations were established under new law in the
- The utility might recover the costs of its
investment from different parties over time,
starting with retail and wholesale customers of the
utility and eventually from the wind farms that
develop along the system (similar to the SCE
Tehachapi model).
- Alternatively, Massachusetts could establish new
authority for a utility to perform this function, with
investment support recovered from all electricity
customers in the Commonwealth in light of the
broad economic, energy, and environmental
benefits afforded by opening up the offshore area
to development (in the same way that the public
has traditionally provided most of the funding for
road development in a state).


ƒ Merchant Approach – A second option is for the offshore transmission system to be
developed and owned by a non-utility transmission entity (or a utility transmission company,
but in a merchant context), with all of the costs paid for directly by the beneficiaries of the
- In this model, the wind project would contract with a transmission developer to
develop/build/operate a radial line to interconnect the wind farm to the high-voltage,
onshore grid. The wind project’s power supply agreements would be structured to
recover the costs of such a line, either directly as a pass-through to buyers of the power,
or as part of the delivered cost of power. The transmission costs would be directly
assigned in this model – otherwise known as participant-funded or beneficiary-funded.
- Alternatively, if more broadly, the citizens/taxpayers of the state were considered to be
the beneficiaries of opening up access to offshore windy areas of the state, a merchant
model could provide for the taxpayers and/or ratepayers of the state (under new
legislative authority) to cover the costs of the merchant “access road” to the offshore
wind zones. In return, the state’s taxpayers/ratepayers could receive the benefit of such
things as: (1) revenues (e.g., royalty payments) from the development of the wind project;
(2) sellable rights to the new capacity established with the new transmission facilities;
and (3) indirect taxes paid by the owners of infrastructure development. (Alternatively,
there could be tax exemptions provided for these facilities, in which case their investment
and operating cost would be reduced).
- Any contract with the transmission provider (which establishes the terms and conditions
of service and compensation) would require a counterparty and the state would need to
decide whether that would be a state agency or one or more of the utilities in the state.
ƒ Public Authority Approach – A third option is for the offshore transmission system to be
developed and owned by a state agency which would have responsibility to plan, build, fund,
and otherwise provide transmission access to the offshore wind resources of the state.
- The public offshore transmission authority could own and operate the facility, or contract
with another party (e.g., a transmission utility or merchant transmission company) to own
and operate the system.
- The state would need to determine how the public authority would recover its investment
(e.g., through fees collected from users of the state’s electric system, and/or developers of
offshore wind; from tax proceeds). The specific direction chosen here depends largely on
whether the public authority is seen as providing a public good or service (e.g., an open
access highway, available to anyone and critical for enabling commerce but supported
through taxes) or a private good or service (e.g., designed to be provided to particular
users at use-based fees for service).
- A policy outcome that establishes offshore transmission development as a public good
could imply the need for a long-term legislative commitment to fund the projects through
annual appropriations, in which case potential funding constraints should be carefully


- Alternatively, the offshore transmission authority could be funded through a dedicated
funding stream – such as a new “offshore transmission fee” assessed on all sales of
electricity in the state. This could follow various approaches: a fee analogous to the
mandatory per-kWh charge collected from all consumers in the state in order to support
energy efficiency programs, as authorized in the Green Communities Act; or the
provisions set forth in the annual state budget under which state agency costs to carry out
its emergency-response functions related to nuclear plants located in or near
Massachusetts are charged through to certain electricity customers, pursuant to
determinations of the Massachusetts Department of Public Utilities.
Assessment Criteria: These options provide different pathways to accomplishing the goal of building out
transmission for offshore wind. Given these various ownership/investment models and possible physical
configurations, state policy makers will be aided by screening them in terms of several criteria aimed at
identifying options that fit well with the state’s broad goals for developing and accessing its wind
resource, as well as with the overall structure of the state’s electric industry and its economic
development agencies.
ƒ Will this model support investment in offshore transmission for wind projects in Massachusetts?
Are the financial/economic incentives sufficient?
ƒ Does the overall transmission model fit with the timing and magnitude of development of
offshore wind resources, and with the character of the technologies (e.g., for wind turbines
located at different depths and in areas with different wind speeds; for submarine cables and
ƒ Is the model of transmission investment recovery likely to align with institutions, authorities, and
electric-industry structures in Massachusetts? Does the model require regional
cooperation/coordination for planning, siting and/or cost support?
ƒ Who bears the risk (of investment recovery) for a project whose capacity could be underutilized
for at least some period of time? In other words, who pays for the transmission project? Do those
who bear the risk get sufficient benefits to warrant support?
ƒ How heavy are the set of political lifts and other implementation challenges that would be
required to achieve each model? Would new legislative authority be required? Would efforts be
required in more than one state?

Strategic Option Set for Consideration by Massachusetts Policy Makers to Support

Transmission for Offshore Wind
All of the options listed in this final and more limited strategic option set assume that the Commonwealth
of Massachusetts plays, at minimum, the role of facilitator of transmission facilities for offshore wind. In
other words, these options assume that without some form of pro-active assistance (including, at a
minimum, coordination, convening, planning, etc.), the chicken-and-egg problems associated with
developing offshore wind and transmission will inhibit the state’s pursuit of its goals for development of
its rich, local offshore wind resources. In some of the options, the state would play a light-handed role,
providing only facilitation activities (but which would nonetheless require funding support). In others,


the state would play a more aggressive role by becoming a direct participant in the electric industry,
including serving as project manager, funder, and/or owner of the transmission facility or facilities. These
activities could be carried out through a newly established Massachusetts Offshore Transmission
Authority or through an existing Commonwealth of Massachusetts executive branch agency, including –
as appropriate – the Executive Office of Energy and Environmental Affairs, the Division of Energy
Resources, and/or the MCEC.

Options in which the Commonwealth of Massachusetts acts as a provider of information, analysis

and other services in support of offshore transmission for wind power development:
ƒ Establish (e.g., as part of the MCEC) and support an office to facilitate information exchange,
planning studies, siting advice, and other analyses on transmission issues for wind project
developers interested in siting wind farms in the offshore waters of Massachusetts and adjacent
federal waters. This activity could include related activities, such as:
ƒ Convening industry groups to share information on transmission technology and technical
feasibility of phased construction of lines to support multiple wind projects over time.
ƒ Developing model contract provisions for the transmission-related elements of long-term
wind-energy contracts.
ƒ Helping fund, carry out, or otherwise support the preparation of technical transmission
interconnection and system-planning studies for specific offshore projects that meet certain
development milestones. Unlike the Governors’ Economic Blueprint Study, these studies
would not be conceptual in nature, and would instead assess the specific interconnection
needs of a particular offshore wind project and its impacts on the onshore grid.
ƒ Identify Massachusetts offshore renewable energy zones for the purpose of developing transmission
planning studies. This could include such activities as:
ƒ Undertaking a process to identify one or more specific Massachusetts offshore wind energy
zones (e.g., “MOSWEZ”). Such zones could be in state ocean waters identified for utility-
scale wind in the Commonwealth’s Ocean Management Plan, and/or in federal waters
offshore of Massachusetts. These zones would be areas into which the Commonwealth
would consider developing or sponsoring the development of transmission infrastructure to
connect wind projects with the onshore high-voltage transmission system.
ƒ In conjunction with the process of identifying potential offshore wind zones, conducting a
solicitation of interest (e.g., an open season process) to determine the level and timing of
demand for transmission capacity among prospective offshore wind project developers in
particular areas of the Commonwealth’s and adjacent offshore waters.
ƒ Carrying out a detailed study to examine the economic trade-offs of supporting multiple
radial facilities to support offshore wind, versus the economics of supporting the development
of a backbone transmission highway to give access to offshore wind facilities in a very-large
MOSWEZ. This study would examine the engineering costs and economic benefits/costs of
alternative configurations. The purpose of the study would be to better understand the cost


and investment-recovery implications of a phased versus non-phased approach to the various
physical configurations.

Options in which the Commonwealth of Massachusetts acts as a pro-active agent in ensuring

development of needed offshore transmission for wind power development:
ƒ Lead regional efforts to develop offshore transmission in New England, including:
ƒ Coordinating efforts with neighboring states in New England to explore whether and if so
how to jointly develop an interstate, offshore transmission backbone system, enabling
development of large regional offshore wind zones. This could be carried out through
establishing a memorandum of understanding among multiple states, with any/all of the
functions and purposes identified above. There are examples in other regions (e.g., the
Rockies) in which neighboring states are exploring mechanisms that would support
collaboration to support transmission investment to connect wind-rich resource areas with
distant load centers. Additionally, there may be models in other areas of public policy (e.g.,
voluntary agreements by states to enter into an interstate compact) that might be applicable to
efforts in this area. Discussions may cover such topics as institution building, governance
issues, cost-allocation principles, planning approaches, and mechanisms to solicit private
transmission proposals to serve interstate policy goals.
ƒ Expand service territories of electric utilities into offshore state oceans.
ƒ Extending the service franchise area of electric utility companies in coastal communities of
Massachusetts, so that the franchise includes not only the terrestrial area of a municipality but
also the offshore area that extends three miles out into the ocean. Extending the service
territory of the utility would indicate the service territory whose retail and wholesale
customers might be responsible for supporting the costs of the “local benefit” upgrades to the
transmission system. Presumably, to the extent that the customers in that territory (or sub-
zone of the state) support the investment in transmission to provide access to offshore wind
zones, those customers would get the value of transmission capacity and/or transmission
congestion contracts.
ƒ Contract for the development/construction of offshore transmission in Massachusetts. This could
be accomplished through:
ƒ Using existing authority of the MCEC (or other state entity, as appropriate) and solicit
competitive proposals from utilities and/or merchant transmission companies to construct
offshore radial transmission facilities. In this option:
ƒ The state would proceed with a process to solicit interest in wind project
development in a particular offshore wind zone.
ƒ The state would contract with the winning transmission provider, who would
undertake detailed transmission studies, interconnection processes, siting/permitting,
and construction.
ƒ The transmission costs could be recovered in a number of alternative ways: (a)
through an assessment on Massachusetts electricity customers, pursuant to cost-


allocation determinations by the Department of Public Utilities that would assure full
investment recovery of the state’s costs to support offshore transmission; (b) through
an assessment on Massachusetts taxpayers, subject to new legislative authority;
and/or (c) as wind projects come on line, also through model contract
terms/provisions in long-term contracts signed by the offshore wind project
developers and the buyers of their renewable power.
ƒ Establish a Massachusetts Offshore Transmission Authority (“MOSTA”). This would involve:
ƒ Enacting new statutory authority to utilize or create a state agency (e.g., MCEC) or authority
(new Massachusetts Offshore Transmission Authority (“MOSTA”)) to arrange for the
construction of a transmission line, to own the facility (or contract with another entity to own
it), and to recover costs from all or some subset of Massachusetts electric consumers and/or
ƒ Developing and financing transmission facilities in advance of and/or timed with the
development of wind projects in the state and/or federal ocean waters offshore of
• Setting rates to recover its costs to develop/finance/construct/maintain offshore transmission
projects from a set of electricity customers. There could be a strong rationale for having the
entire body of retail electricity customers in Massachusetts help pay fees to support the
MOSTA’s investments to assure the availability of renewable energy production and
economic development from offshore wind development. These electricity customers are
roughly the same set of people in Massachusetts who, as taxpayers and residents, will receive
the indirect benefit from the tax contributions provided by the wind power project and any
associated economic activity in the state). The authority should be established in a structure
or form that enables it to be self-financing through a combination of user fees, payments from
wind projects, royalty-based fees, and/or a variety of other revenue streams (including annual
appropriations from the state legislature, loan guarantees, bond guarantees, and/or other
means of public funding).
Table 5 provides a preliminary screen to assist state energy officials in assessing these options. With the
exception of the more proactive roles for Massachusetts state government – in the form of a
Massachusetts Offshore Wind Transmission Authority (which might be viewed as alternative strategies to
accomplish similar objectives) – the options can be viewed as additive, rather than mutually exclusive.
These options indicate that there are many paths forward for Massachusetts to help realize its vision of a
state that is creatively and effectively tapping its abundant wind resources for the benefit of the economy,
the environment, and the well-being of its citizens.


Table 5
Assessment of Optional Actions for the Commonwealth of Massachusetts to Consider
Undertaking in Support of Offshore Transmission for Offshore Wind Development
Potential Implications for:

Investment in
offshore Sequencing of Alignment with
transmission to MA offshore existing state Balance of risk
support wind wind project and regional and reward, Direct cost to Ease of
Role of state government: development development institutions benefits and costs carry out Implementation

Status quo Business as usual Very

3but does not Very
address chicken
& egg stalemate

3 High value to
Low Easy


Pay for Directionally Significantly Viewed as Uncertain – will Moderate May be hard to
transmission supportive supportive for subsidy for require picking establish the list
studies individual individual winners, so could of projects to be
projects projects be misses supported

Identify MA
offshore wind
3 Potentially high
value relative
Moderate Has been
accomplished in
zones (for to out-of-pocket other regions
transmission) cost

agent to
3 Low out-of-
pocket cost;
Low Would require
focused attention
accomplish discussions, moderate time of senior state
offshore develop MOU investment officials
Expand utility
service area into
Supportive Supportive
3 Depends upon
structure adopted
Low No apparent
precedent; will
ocean still require
recovery solutions

CEC (or other Highly Highly May be viewed Depends upon Low out-of- No apparent
entity) contract supportive supportive as “non-market” structure adopted pocket cost at the precedent, but
for transmission solution – but outset; may may be viewed as
projects addresses require high cost relatively positive
chicken & egg for eventual approach
stalemate investments

Establish MA Highly Highly May be viewed Depends upon Moderate out-of- Precedents exist
Offshore supportive supportive as “non-market” structure adopted pocket cost at the in other states and
transmission solution – but outset; may regions (under
Authority addresses require high cost state and federal
chicken & egg for eventual law)
stalemate investments



Energy Information Administration (“EIA”), “Table S3. Energy Consumption Estimates by Source, 2007,” (accessible at:, and “State Ranking 1. Total Energy Production,
2007,” (available at:
Estimates of wind resource potential can generally be classified into two categories. “Technical potential” represents the
amount of offshore wind potential that could be captured given existing technologies, but does not include any consideration
about whether it is economic to do so. “Technical” estimates may or may not take into account siting constraints, such as
wildlife habitats, shipping lanes, and other competing uses. “Economic potential” is a subset of technical potential, and
represents the amount of offshore wind resource that could realistically be captured after considering cost. Estimates
presented throughout this Technical Report are of technical potential.
W. Musial and B. Ram, “Energy from Offshore Wind,” National Renewable Energy Laboratory, Offshore Technology
Conference, Houston, Texas May 1–4, 2006.
Offshore Statistics, European Wind Energy Association, January 2009, (available at:
Beatrice Wind Farm Development Project website, (available at: “It should
be noted that Deepwater Wind has licensed the OWEC Tower AS jacketed technology, in use at the Beatrice project, for use
in New Jersey and Rhode Island. The hope is that this technology would allow Deepwater Wind to install turbines 10-15
miles from the NJ and RI shores.”
Offshore Statistics, European Wind Energy Association, January 2009, (available at:
Alpha Ventus Project website, (available at:
W. Musial and B. Ram, “Energy from Offshore Wind,” National Renewable Energy Laboratory, Offshore Technology
Conference, Houston, Texas May 1–4, 2006.
StanoilHydro website, (available at:
Levitan & Associates, “Phase II Wind Study,” prepared for ISO-NE, March 2008.
Based on information in ISO-NE, “New England 2030 Power System Study Draft: Demand and Resource Assumptions,”
May 15, 2009; and Levitan & Associates, “Phase II Wind Study,” prepared for ISO-NE, March 2008. These calculations of
approximately 19 GW and 4.3 GW of potential offshore wind resources for Rhode Island and Maine in water 30 meters or
less have been prepared by Analysis Group, based on estimates from the two aforementioned documents. The “Phase II
Wind Study” estimates approximately 73 GW of potential offshore wind resources in New England in waters 30 meters or
less, but it does not break out that estimate by state. The “New England 2030 Power System Study Draft: Demand and
Resource Assumptions” subsequently breaks down the wind resource potential by state using Levitan & Associates maps,
which visually illustrate wind resource distribution throughout coastal New England, and assigns resource amounts to each
state by roughly allocating resources by geographic area. The “New England 2030 Power System Study Draft: Demand and
Resource Assumptions” analysis was performed on a Levitan & Associates estimate that excluded a siting buffer zone from
shore to 3-miles out, but in this case the resource proportions by state described above were applied to the larger 73 GW
estimate that does not exclude a 3-mile buffer zone.
University of Maine website, (available at:
ISO-NE, “New England 2030 Power System Study Draft: Demand and Resource Assumptions,” May 15, 2009; and Levitan
& Associates, “Phase II Wind Study,” prepared for ISO-NE, March 2008. This calculation of approximately 49 GW of


potential offshore wind resources off the coast of Massachusetts in water 30 meters or less is similar to those described above
for Rhode Island and Maine.
J. Norden (Manager, Renewable Resource Integration, ISO-NE), “Wind Power Integration in New England,” presentation to
the AWEA Offshore Workshop, Boston, Massachusetts, December 2&3, 2009.
One of the primary issues related to building wind farms near shore is that of siting constraints. These constraints range from
conflicts with other uses (e.g., commercial fishing, recreational fishing, shipping lanes), to environmental factors (e.g., habitat
and migratory areas for protected, endangered or even non-threatened species of fish, mammals, birds, etc; and sensitive
and/or protected ecosystems), and others. Since these siting constraints are most often highly specific to particular areas, it is
very time-consuming and difficult to analyze issues brought up by all relevant stakeholders and devise a precise method by
which to scale down unconstrained wind resource potential estimates (that are originally based simply on wind data and do
not consider siting constraints). Instead, it is usually easiest to use a simple “exclusion factor” when trying to account for
these constraints, and when comparing resource potential across different regions, or even within specific regions that may
have different siting constraint issues. The Navigant Consulting study (“Massachusetts Renewable Energy Potential: Final
Report,” Prepared for the Massachusetts Department of Energy Resources (DOER) and Massachusetts Technology
Collaborative (MTC), Navigant Consulting, August 6, 2008) cited in the “Draft Massachusetts Ocean Management Plan”
uses a 66.6 percent exclusion factor (e.g., 66.6 percent of resources are excluded) for waters between 0 – 20 miles from
shore, similar to those introduced in “Future for Offshore Wind Energy in the United States” by Musial and Butterfield, 2004,
cited below.
ISO-NE, “New England 2030 Power System Study Draft: Demand and Resource Assumptions,” May 15, 2009; and Levitan
& Associates, “Phase II Wind Study,” prepared for ISO-NE, March 2008. This estimate incorporates the same ratios as those
used above for breaking out Massachusetts wind resource potential from an overall New England estimate. Given the fact that
all sites within 3 miles of shore are excluded in this example, a slightly lower exclusion factor of 50 percent was used for the
small remaining windy areas, yielding approximately 3 GW of offshore wind resource potential.
ISO-NE, “New England 2030 Power System Study Draft: Demand and Resource Assumptions,” Attachment 2 (citing study
prepared by Levitan & Associates, “Phase II Wind Study”), May 15, 2009. This estimate takes the 49 GW estimate cited
above, which includes no siting constraints, and applies a 66.6 percent exclusion factor. This calculation yields a resource
potential, with a mix of siting constraints taken into consideration, of approximately 16 GW.
“Massachusetts Renewable Energy Potential: Final Report,” Prepared for the Massachusetts Department of Energy Resources
(DOER) and Massachusetts Technology Collaborative (MTC), Navigant Consulting, August 6, 2008; cited in the
“Massachusetts Ocean Management Plan,” Massachusetts Executive Office of Energy and Environmental Affairs, December
ISO-NE, “New England 2030 Power System Study Draft: Demand and Resource Assumptions,” Attachment 2 (citing study
prepared by Levitan & Associates, “Phase II Wind Study”), May 15, 2009; and W. Musial, and S. Butterfield, “Future for
Offshore Wind Energy in the United States,” National Renewable Energy Laboratory, presented to Energy Ocean 2004, Palm
Beach, Florida, June 2004. For this estimate, the NREL study cited here provides an estimate of wind resource potential
between miles 5-20 offshore, and the Levitan & Associates study provides an estimate of wind resource potential between
shore and three miles out. The remaining mile unaccounted for (the 4th mile) is assumed to be similar in resource potential to
the third mile out. All estimates relied upon here were originally for New England, but were scaled down to just
Massachusetts using the method described above. An exclusion factor of 60 percent was used in this case rather than 66
percent to account for the fact that much of the deepwater resources will likely have fewer exclusion criteria than was
assumed in Musial & Butterfield (2004), due in part to the fact that Massachusetts is actively seeking to facilitate offshore
wind development.
W. Musial, “Offshore Wind Electricity: A Viable Energy Option for Coastal United States,” National Renewable Energy
Laboratory, Marine Technology Society Journal, Fall 2007; and W. Musial, and S. Butterfield, “Future for Offshore Wind
Energy in the United States,” National Renewable Energy Laboratory, presented to Energy Ocean 2004, Palm Beach, Florida,
June 2004. This forward-looking estimate relies upon wind resource potential estimates that were originally for New
England, but were scaled down to just Massachusetts using the method described above. Exclusion criteria were similar to
those above, but with exclusion factors nearing zero in the far-offshore deepwater areas. This estimate also accounts for
continuing technological improvement and increase in average capacity factors.
ISO-NE, “CELT Report [Capacity, Energy, Load and Transmission],” 2009.


W. Musial, “Offshore Wind Electricity: A Viable Energy Option for Coastal United States,” National Renewable Energy
Laboratory, Marine Technology Society Journal, Fall 2007.
U.S. Department of Energy (“DOE”), “Economic Benefits, Carbon Dioxide (CO2) Emissions Reductions, and Water
Conservation Benefits from 1,000 Megawatts (MW) of New Wind Power in Massachusetts,” March 31, 2009 (available at:
R. Pollin, J. Heintz, and H. Garrett-Peltier, “The Economic Benefits of Investing in Clean Energy: How the economic
stimulus program and new legislation can boost U.S. economic growth and employment,” Department of Economics and
Political Economy Research Institute (PERI), University of Massachusetts, Amherst, June 2009, page 28.
Ibid, page 36.
“Annual Wind Industry Report: Year Ending 2008,” American Wind Energy Association, April 2009.
EIA, “Table ES3. New and Planned U.S. Electric Generating Units by Operating Company, Plant and Month, 2008-2009,”
Electric Power Monthly, August 25, 2008; EIA, “Table ES3. New and Planned U.S. Electric Generating Units by Operating
Company, Plant and Month, 2007-2008,” Electric Power Monthly, March 2008; and DOE, “Economic Benefits, Carbon
Dioxide (CO2) Emissions Reductions, and Water Conservation Benefits from 1,000 Megawatts (MW) of New Wind Power
in Massachusetts,” March 31, 2009, (available at:
U.S. DOE Annual Wind Report, May 2008, page 21.
The price of liquid petroleum fuels used for power generation (i.e., distillate fuel oil, residual fuel oil, jet fuel, kerosene, and
waste oil) averaged $95.94 in 2008, compared to $16.03 per barrel in 1999 – a six-fold price increase. EIA., Table 4.1.
Receipts, Average Cost, and Quality of Fossil Fuels: Total (All Sectors), 1995 through August 2009, Report No.: DOE/EIA-
0226 (2009/11), (available at In the U.S. in 2008, 1 percent of
electricity was produced by combustion of liquid petroleum fuels, including residual fuel oil, distillate fuel and others.
EIA., Table 4.1. Receipts, Average Cost, and Quality of Fossil Fuels: Total (All Sectors), 1995 through August 2009, Report
No.: DOE/EIA-0226 (2009/11), (available at:
EIA, Table 4.1. Receipts, Average Cost, and Quality of Fossil Fuels: Total (All Sectors), 1995 through August 2009, Report
No.: DOE/EIA-0226 (2009/11), (available at:
“Annual Wind Industry Report: Year Ending 2008,” American Wind Energy Association, April 2009.
U.S. DOE Annual Wind Report, May 2008, pages 23-24.
B. Swezey, et al., “A Preliminary Examination of the Supply and Demand Balance for Renewable Electricity,” NREL,
October, 2007.
Letter from AWEA to FERC Chairman Kelliher, February 26, 2007.
Western Resources Associates, “Smart Lines: Transmission for the New Renewable Energy Economy,” 2008.
Governor Deval Patrick’s Official Website, 2009 Press Releases (available at:
Governor Deval Patrick’s Official Website, 2008 Press Releases, (available at:
Governor Deval Patrick’s Official Website, 2008 Press Releases, (available at:


Governor Deval Patrick’s Official Website, 2008 Press Releases, (available at:
Governor Deval Patrick’s Official Website, 2008 Press Releases, (available at:
Ian Bowles, Testimony before the Subcommittee on Energy and Mineral Resources and the Subcommittee on Insular Affairs,
Oceans and Wildlife, 2009, (available at:
Governor Deval Patrick’s Official Website, 2008 Press Releases, (available at:
content&f=text_2008-05-28_oceans&csid=Agov3) and “Secretary Chu, Governor Patrick Announce $25 Million for
Massachusetts Wind Technology Testing Center,” U.S. Department of Energy Website, May 12, 2009, (available at:
Governor Deval Patrick’s Official Website, 2008 Press Releases, (available at:
“Offshore Wind: States sharing the sea for new industry,” Climate Wire, September 9, 2009, (available at:
Paul J. Hibbard, Testimony before the House Subcommittee on Energy and Environment, Committee on Energy and
Commerce, June 12, 2009, (available at:
Governor Deval Patrick’s Official Website, 2009 Press Releases, (available at:
“Test areas found for offshore wind power,” Portland Press Herald, September 2, 2009.
“Maryland Energy Administration gauging interest in offshore wind farms,” Baltimore Business Journal, September 15,
“Babcock & Brown’s Bluewater Wind Signs First U.S. Contract for Sale of Offshore Wind Power,” Bluewater Wind Press
Release issued June 23, 2008 (available at
and Joseph Romm, “Delaware to have offshore wind farm in 2012,” The Grist, June 26, 2008 (available at
Steven Rourke, “EBC Energy Seminar New England Transmission Update,” ISO-NE System Planning, presentation to the
EBC Energy Seminar, April 2, 2009.
Texas Senate Bill No. 20. (available at:
ERCOT, “Analysis of Transmission Alternatives for Competitive Renewable Energy Zones in Texas,” 2006. (available at:
U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, “20% Wind Energy by 2030: Increasing
Wind Energy’s Contribution to U.S. Electricity Supply,” May 2008, pages 96-97.
Public Utility Commission of Texas, News Release, July 17, 2009. “Earlier this year, the Electric Reliability Council of
Texas (ERCOT), the agency which oversees the state’s electric grid, responded to a PUC order to provide several scenarios to
the commission. The four scenarios contained a total of 12,053, 18,456, 24,859, and 24,419 MW of installed wind generation
distributed among five Competitive Renewable Energy Zones (CREZs) in West Texas and the Texas Panhandle.”


A. Schumacher, S. Fink, and K. Porter, “Moving Beyond Paralysis: How States and Regions Are Creating Innovative
Transmission Policies for Renewable Energy Projects,” The Electricity Journal, Vol. 22, Issue 7, August/September 2009.
Presentation by Barry Smitherman, Chairman of the Public Utility Commission of Texas in front of the House State Affairs
Committee, February 24, 2009 (available at:
A. Schumacher, S. Fink, and K. Porter, “Moving Beyond Paralysis: How States and Regions Are Creating Innovative
Transmission Policies for Renewable Energy Projects,” The Electricity Journal, Vol. 22, Issue 7, August/September 2009;
and “Integrating Locationally-Constrained Resources into Transmission Systems: A survey of U.S. Practices,” WIRES in
conjunction with CRA International, October 2008.
A. Schumacher, S. Fink, and K. Porter, “Moving Beyond Paralysis: How States and Regions Are Creating Innovative
Transmission Policies for Renewable Energy Projects,” The Electricity Journal, Vol. 22, Issue 7, August/September 2009.
“Transmission Expansion in New York State,” New York Independent System Operator White Paper, November 2008,
(available at:
A. Schumacher, S. Fink, and K. Porter, “Moving Beyond Paralysis: How States and Regions Are Creating Innovative
Transmission Policies for Renewable Energy Projects,” The Electricity Journal, Vol. 22, Issue 7, August/September 2009.
Southern California Edison website, (available at: and
A. Schumacher, S. Fink, and K. Porter, “Moving Beyond Paralysis: How States and Regions Are Creating Innovative
Transmission Policies for Renewable Energy Projects,” The Electricity Journal, Vol. 22, Issue 7, August/September 2009.
“Portfolio of New EHV Transmission Projects Approved: Benefits Will Be Balanced Across SPP Region,” SPP Press
Release, April 29, 2009.
Under a license-plate, or zonal, rate design, a customer pays the embedded cost of transmission facilities that are located in
the same zone as the customer. A customer would not pay for other transmission facilities outside of the zone, even if the
customer engaged in transactions that rely on those zones.
Federal Energy Regulatory Commission, Order on Compliance Filing, “Southwest Power Pool, Inc.,” Docket Nos. RT04-1-
002 and ER04-48-002, 108 FERC ¶ 61,003, Issued July 2, 2004, Pages 35-36.
“Portfolio of New EHV Transmission Projects Approved: Benefits Will Be Balanced Across SPP Region,” SPP Press
Release, April 29, 2009.
Long Island Power Authority website, (available at:
“LIPA/Neptune Activate New Cable Bringing Lower-Cost Energy Directly to Long Island from New Jersey for the First
Time,” Long Island Power Authority Press Release, June 28, 2007.
J. Rueger and D. Attanasio, “The Winds of Change: Commitment Secures Transmission Rights,” The Electricity Journal,
Vol. 22, Issue 6, July 2009.
Tennessee Valley Authority, Form 10-K (Appendix C), Annual Report Pursuant to Section 13, 15(d), or 37 of the Securities
Exchange Act of 1934, For the fiscal year ended September 30, 2008 (hereinafter “TVA 2008 Form 10-K”), page 6.
TVA 2008 Form 10-K.
U.S. Department of Energy, 2008 Transition Team, Book III, Section 10 – Power Marketing Administrations.
Wyoming Infrastructure Authority, “About Us,” (available at:
“Review of existing methods for transmission planning and for grid connection of wind power plants,” Commission of the
European Communities - Directorate General Joint Research Centre (JRC) - Institute for Energy, June 15, 2009.


“Wind Power In Context – A Clean Revolution in the Energy Sector,” Energy Watch Group / Ludwig-Boelkow-Foundation,
December 2009.
“Integrating Wind: Developing Europe’s Power Market for the Large-Scale Integration of Wind Power,” TradeWind,
February 2009.
“Oceans of Opportunity: Harnessing Europe’s Largest Domestic Energy Resource,” European Wind Energy Association,
“Ireland and eight European countries agree on North Seas Wind Project,” Irish Department of Communications, Energy and
Natural Resources press release, December 7, 2009, (available at:
“Commission of the European Communities - Directorate General Joint Research Centre (JRC) - Institute for Energy, Review
of existing methods for transmission planning and for grid connection of wind power plants,” June 15, 2009; and D. Swider,
et al., “Conditions and Costs for Renewables Electricity Grid Connection: Examples in Europe,” Renewable Energy, 33,
Dr. C. Decker, “International Approaches to Transmission Access for Renewable Energy,” Regulatory Policy Institute, UK,
March 2008.
System Integration of Distributed Generation – Renewable Energy Systems in Different European Countries, KEMA &
Leonardo Energy, January 2009.
Dr. C. Decker, “International Approaches to Transmission Access for Renewable Energy,” Regulatory Policy Institute, UK,
March 2008.
Facts about the German Electric Grid, Vattenfall, June 2009.
Dr. C. Decker, “International Approaches to Transmission Access for Renewable Energy,” Regulatory Policy Institute, UK,
March 2008.
Facts about the German Electric Grid, Vattenfall, June 2009.
Transmission Grid Access and Pricing in Norway, Spain and California – A Comparative Study; SINTEF Energy Research,
Instituto de Investigation, Lawrence Berkeley National Lab; September 1999.
Dr. C. Decker, “International Approaches to Transmission Access for Renewable Energy,” Regulatory Policy Institute, UK,
March 2008.
Joint DECC and OFGEM statement, “Overview of Great Britain’s Offshore Electricity Transmission Regulatory Regime,”
June 2009; and Office of Gas and Electricity Markets / RBC Capital Markets, “Offshore Transmission: First Transitional
Tender Information Memorandum,” September 2009.
Office of Gas and Electricity Markets, “Transmission investment and renewable generation,” October 2003.
E. Krapels, “Integrating 200,000 MWs of Renewable Energy into the US Power Grid: A Practical Proposal,” Anbaric
Transmission, February 2009.


J. Green, A. Bowen, L.J. Fingersh, and Y. Wan, “Electrical Collection and Transmission Systems for Offshore Wind Power,”
National Renewable Energy Laboratory, March 2007.
See, for example: W. Kempton, “Transmission and wind,” Center for Carbon-free Power Integration, College of Earth,
Ocean, and Environment, University of Delaware, presentation to the Energy and Environment Study Institute, July 17, 2009;
E. Krapels, “Integrating 200,000 MWs of Renewable Energy into the US Power Grid: A Practical Proposal,” Anbaric
Transmission, February 2009; S. Tierney, “A 21st Century ‘Interstate Electric Highway System’ – Connecting Consumers
and Domestic Clean Power Supplies,” Analysis Group, October 30, 2008; DOE, Office of Energy Efficiency and Renewable
Energy, ”20% Wind Energy by 2030: Increasing Wind Energy’s Contribution to U.S. Electricity Supply,” May 2008; L.
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Request of the New England States Committee on Electricity (“NESCOE”), to the ISO-New England, March 2009.
Satellite images for Figures 12a-12d are based on Google Maps, accessed November 2009.
Satellite images for Figures 13a and 13b are based on Google Maps, accessed November 2009.